A landlord may be prevented from exercising its contractual right to recover costs as service or administration charges in circumstances where proceedings brought under section 168(4) of the Commonhold and Leasehold Reform Act 2002 in contemplation of serving a notice under section 146 of the Law of Property Act 1925 were pointless.
In Avon Ground Rents Ltd v Ward [2023] UKUT 88 (LC); [2023] PLSCS 68, the appellant was the freeholder of a building situated in Milton Keynes. The respondent held a long lease. Under the terms of the respondent’s lease, she was required to keep the flat in repair and to give the landlord prior notice of any works to the same.
In November 2021, the respondent had works carried out to the flat. A pipe was fractured during the works, resulting in flood damage to the building. The appellant subsequently informed the respondent that it intended to commence forfeiture proceedings.
In February 2022, the service charges were demanded from the respondent for the following quarter; the appellant thereby waived its right to forfeit for the alleged breaches in November 2021. Notwithstanding, in March 2022 the appellant applied to the First-tier Tribunal for a determination under section 168(4) that the respondent had breached the covenants of the lease. The breaches were found proved.
The lease obliged the respondent to pay costs incurred by the lessor “in contemplation of any proceedings” under section 146. Further, under paragraph 27 of the lease, the respondent was required to pay the costs of repairing the building where the repair was necessitated by her act or default.
To prevent the appellant from exercising its contractual right to recover the costs of the proceedings through the service or administration charges, the respondent applied to the FTT for orders under section 20C of the Landlord and Tenant Act 1985 and under paragraph 5A of Schedule 11 to the 2002 Act. The FTT made the orders on the basis that the proceedings were “misguided” and the costs were unreasonably incurred.
On appeal, the Upper Tribunal (Lands Chamber) found that although the appellant was entitled to bring the section 168 proceedings on the basis that it would make it easier to recover its costs under paragraph 27 of the lease, this did not entitle the appellant to its costs under the lease. The appellant had waived its right to forfeit for the breach of covenants, and insofar as proceedings were commenced in contemplation of the service of a section 146 notice they were pointless. The respondent should not be required to pay the appellant’s costs, despite its contractual right to the same. The appeal was dismissed.
Elizabeth Dwomoh is a barrister at Lamb Chambers
