First Tier Tribunal (Property Chamber)
On July 21st 2013, the LVT became a First Tier Tribunal (Property Chamber). It runs through the same network of five regional offices and appeals will continue to be heard in the Lands Chamber (as part of the Upper Tribunal) except for those relating to land registration cases which must be made to the Tax and Chancery Chamber of the Upper Tribunal. The FTT will still be independent of government and will hear both sides of cases from landlords, tenants, freeholders and leaseholders such as:
- Enfranchisement disputes (buying the freehold);
- Individual lease extension (houses and flats) disputes;
- Right to Manage claims;
- Management orders;
- Lease variations;
- Breaches of covenant determinations;
- Variable service charge disputes;
- Determination of rent increases for ‘fair’ or ‘market’ rates;
- Recognising a tenants’ association
- Improvement notices and prohibition orders under the Housing Act 2004;
- Disputes about licences for houses in multiple occupation.
Before going to court, it is always recommended that the Alternative Dispute Resolution be used first. If this fails then the first step will see the Tribunal try to clarify the issues, offer a mediation service and set out instructions for the conduct of the case. Regulations prescribe that at the Pre-Trial Review the Tribunal will a)“endeavour to secure that the parties make all such admissions and agreements as should reasonably to be made by them in relation to the proceedings and b) record in any order made at the pre-trial review any such admission or agreement or any refusal to make such admission or agreement.”
In plain English this means that the Pre-Trial Review Order makes no reference to any offers made by leaseholders or that the freeholder may refuse to negotiate. It is therefore essential to have this information on record, for it may have a direct bearing on the issue of costs later on. Whilst the applicant will pay a hearing fee and (where a hearing is held) a hearing fee, normally each party will pay their own costs. Having said that, because freeholder costs are classed as an ‘administration charge’ there are two ways in which they can be recovered from leaseholders: a) providing that recovery is ‘reasonable’ they can be recovered directly from the defaulting person or, b) if the legal costs incurred are included in the list of services provided by the freeholder (or the managing agents) they can be recouped as a service charge and apportioned across all leaseholders.
However, many old leases (i.e. written before 1996) will not contain either of the specific clauses referred to above. Some, (such as my own) simply state that the Lessee is ‘to pay the Lessor all costs, charges and expenses (including legal costs and fees payable to a Surveyor) which may be incurred by the Lessor in (or in contemplation of) any proceedings under s146 of the Law of Property Act 1925 (restrictions on and relief against forfeiture of leases).
More specifically, under s146(3) an obligation is however imposed on all leaseholders to pay the ‘reasonable costs and expenses properly incurred by the lessor in the employment of a solicitor and surveyor or valuer or otherwise in reference to any breach giving rise to the right of re-entry or forfeiture’. This obligation is regardless of whether the lease allows the recovery of legal costs from an individual leaseholder or not.
So, whilst it may be arguable that issuing a claim for the payment of the service charges and ground rent is a precursor to forfeiture proceedings, using it as an argument for recovery must be given very careful consideration as a) it may be challenged which will increase costs and b) forfeiture may ultimately prove to be unworkable.
Papers submitted to the Tribunal are known as ‘bundles’ and the Tribunal may invite both parties to agree on what their respective bundles should contain. However, it is the freeholder who must adhere strictly to the agreed timetable for producing their documents for two reasons: a) because producing them too late prevents the Tribunal from merging the documents of both parties into one single Bundle and having to refer to two sets of page numbers is extremely time-consuming and b) the possibility of inadvertently referring to one bundle more than the other is very real and leaseholders could be at a major disadvantage if any of their submission was overlooked!
The Tribunal can be asked to make sure that there is plenty of time for leaseholders to check all the documents, including any witness statements, (hearsay is admissible) before the day of the hearing.
If freeholders should dump their documents the day before the hearing then leaseholders should ask for an adjournment although its important to note that the Tribunal has the power to strike out a case if a party fails to comply with its directions about the producing of documents in a timely manner.
These are semi-formal with neither side being required to be represented by a barrister, solicitor or valuer. If the choice is to forego legal representation then it is down to the leaseholder to present the case, (including arguments and evidence), clearly, concisely and concern only the matter in dispute. After hearing the other side of the case, the Tribunal determines the issue on the basis of the evidence and the judgment and experience of the Tribunal members.
If a representative (whether legally qualified or not) is appointed by a party to represent them in the proceedings they are subject to written notice of appointment meaning that their name and address are given to the Tribunal and the other parties.
Expert evidence cannot be introduced without the Tribunal’s consent and must be in the form of a written report provided to the Tribunal and each other’s parties a) at least 7 days before the date of the oral hearing or b) the date when the issue dealt with by the expert’s report will be decided without a hearing.
In cases of a technical nature, the rules mean that it is the duty of an expert to help the Tribunal on matters within their expertise so the Tribunal is usually assisted by expert evidence from a valuer or experienced property manager. This duty overrides any obligation to whoever instructs or pays the expert.
There is scope in the rules for the Tribunal to direct that the parties jointly instruct the expert and the experts report must contain certain statements and information as a) laid down by the rules, b) be addressed to the Tribunal and c) signed by the expert.
Controlling Landlord Costs
The First Tier Tribunal (FTT) has some powers to control freeholder costs under s20c of the Landlord and Tenant Act 1985 (limitation of service charges: costs of proceedings) and can make a ruling limiting the right to pass costs back to the leaseholders through the next year’s service charge. This decision is made at the Tribunal’s discretion and the leaseholder generally has to win a considerable amount of a case to have a chance of this happening.
This power doesn’t however apply where the landlord is entitled to some of their costs by statute, nor does it apply in many cases where the landlord initiates the action for breach of the lease as in the latter it can be argued that the costs are “administration costs” rather than service charges. In such cases the Tribunal’s powers to limit costs under s20c become immaterial and the leaseholder is obliged to pay the landlord’s costs to the extent that they are ‘reasonable’.
It is however important to note that the payment of costs by leaseholders are limited only in certain circumstances. They can, in fact, be unlimited, and can be awarded by a superior court if a person has acted unreasonably in bringing, defending or conducting proceedings. The Tribunal Procedure (First Tier Tribunal)(Property Chamber) Rules 2013 s13(1) reads: the Tribunal may make an order in respect of costs only a) under s29(4) of the Tribunal, Courts and Enforcement Act 2007 (wasted costs) and the costs incurred in applying for such costs or b) if a person has acted unreasonably in bringing, defending or conducting proceedings.
This can only be avoided by the Tribunal making an order under s20c the Landlord and Tenant Act 1985.
This can be given verbally at the hearing but regardless of who the decision favours, the Tribunal must, (as soon as it is reasonably practicable to do so), give to each party a notice stating its decision along with written reasons about how and why it was reached.
Permission to Appeal
Application to appeal to the Lands Chamber must be made first to the Property Chamber for them to grant permission. The Lands Chamber will not accept an appeal without such permission and they must receive it within 14 days of the parties being sent the decision of the Property Chamber. If such permission is refused, only then can an application for permission to appeal be made to the Lands Chamber.
Additionally (and with the agreement of the Upper Tribunal), complex cases which could have the potential to be appealed on points of law could be referred to the next level with no substantive hearing before the FTT, a move designed to save time.
OUR RMC AT THE TRIBUNAL
Our RMC freehold company has recently been taken to the FTT as a leaseholder challenged our attempt at recovery of his arrears. He did not adhere to the procedures for commencing a challenge and we have never been taken to court in the 11 years since our RMC and agent have run the block. He has also owned his own flats for 7 years without so much as a squeak in protest.
He also ignored Tribunal directions and was debarred from the hearing. Not to be deterred he actually turned up on the day and asked for an adjournment as he claimed to have no knowledge of the debarment and had not been in contact with his brief as both parties had been in hospital! After having to sit and listen this absolute rubbish he was then allowed to stay as the hearing was held in open court and he had the right to do so as member of the public. I cannot tell you how angry I was at this but there was nothing we could do.
Security were called to sit in on the hearing and even at the end, he deliberately tried to speak to the panel by hanging around and making our Barrister and solicitor wait until he left.
The upshot is that we are waiting on a decision as we are a complicated case so I will update this section when I get it.
Watch this space!
Note: Information on how to apply to the FTT can be read in the First Tier Tribunal Application Guide
Full information on the Property Tribunal can be read at The Tribunal Procedure (First-tier Tribunal) (Property Chamber) (Rules) 2013