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It is undecided whether the indemnity principle – that a paying party cannot be ordered to pay a receiving party more in costs than the receiving party is itself liable to pay – applies in the F–tT. However, in RTM cases, section 88(2) of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) applies, so as to expressly limit a landlord’s recoverable costs. An over–zealous application of the indemnity principle is to be avoided by tribunals.
Legal costs incurred by a landlord in connection with litigation brought against it for the enforcement of the landlord’s repairing covenants, which the landlord was unsuccessful in, could not be recovered as service charges. Neither could the landlord recover costs paid to a tenant in settlement of the claim. The expenditure could not be described as having been incurred in “the proper management administration and maintenance” of the property, but in fact was incurred as a result of the landlord’s own breach of covenant.
The Court of Appeal considered the extent to which previous decisions of the Upper Tribunal, other than as to the law, are admissible before, and binding upon, the First Tier Tribunal. The case under appeal concerned a dispute over the premium payable for a lease extension but potentially has wider application to all Upper Tribunal decisions.
Whilst an order for costs made by the County Court does not necessarily limit later recovery of the full amount of costs incurred under the terms of the lease, close attention should be paid to the terms of the order made, especially when parties are compromising proceedings.
A case management decision showing that the Tribunal may be willing to admit new expert evidence after the deadline for filing has passed (and close to the date of trial) if the new evidence is of substantial importance to the matters in issue and will ensure that questions raised by the other side do not go unanswered.
This case concerned the recovery of unpaid service charges. The landlord demanded of its tenant an interim service charge, being an estimate of the service charge payable for a service charge year. The lessee failed to pay the amount demanded.