Recovering legal fees

BACKGROUND

Liverpool Quays Management Ltd instructed solicitors to collect the service charge due from lessees under the leases. Invoices were submitted by the solicitors on a quarterly basis and paid from the service charge account. A clause common to all the leases was relied on to recover such sums from lessees as a service charge, including: “the fees and disbursements paid to any Accountant Solicitor or Surveyor in relation to the…collection of the rent and service charges from the lessees of the apartments and dwelling houses…”.

Before the Upper Tribunal the Management Company argued the clause was constructed to permit such fees to be recovered as a service charge item and the intention of the clause was to expressly provide for such services to be retained should the Management Company deem appropriate. The lessee contended the clause did not permit recovery of such fees and the construction of the clause was merely to permit recovery where the management company has incurred costs in instances where the service charges required auditing and certification. Specifically, legal costs where the said service charges and ground rent remained unpaid following audit and certification.

In relation to the lessees’ argument on this point the President commented “I cannot accept this argument” (page 7, para 19, line 10) and decided in favour of the Management Company. The provision relied on to recover such costs was held to be “clear in its terms. It covers solicitors’ fees and disbursements for the collection of rent and service charges from the lessees…The use of solicitors for the routine collection and handling of rent and service charges on behalf of the management company seems to me to be clearly reasonable…” (page 7, para 19, lines 12-17).

The case serves as validation for all landlords and Management Companies who use solicitors in such circumstances and provides a useful rebuttal to any arguments raised by lessees. The test of reasonableness still applies on a subjective basis and it would not give a landlord an unfettered right to recover such legal costs if excessive. It does, however, bring the recovery of such costs on an even footing with more recognisable service charges, such as maintenance and repair costs, and removes a potential strand to any lessee’s argument that the construction of such leases renders the sums irrecoverable.

Jonathan Leitch is a partner in J B Leitch LLP solicitors (who acted for the Management Company via solicitor Phil Parkinson).