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13th January 2017

Welcome News for Landlords on Section 60 Costs

By Kate Andrews

Summary

On an appeal case[1] the Upper Tribunal has found that the following are recoverable section 60 costs:

  • The costs of preparing and serving a counter notice in response to a tenant’s Section 42 Notice.
  • The solicitor’s costs in instructing a valuer and considering the valuation report.
  • Costs incurred by a grade A fee earner in undertaking the lease extension work.

Background

  • Certain solicitors’ and valuers’ costs incurred in connection with lease extensions are recoverable from the leaseholder by landlords under section 60[2].
  • The scope of these costs is carefully limited and only costs relating to (a) any investigation in relation to the tenant’s right to a lease extension, (b) any valuation of the tenant’s flat obtained for the purpose of fixing the premium in relation to the lease extension and (c) the grant of a new lease (which is largely limited to providing the initial draft lease and the mechanics of completion) are recoverable.
  • In practice it has always been common for tenants’ solicitors to resist any landlord’s costs arising out the preparation and service of a counter notice and, often, any legal costs involved in liaising with the valuer and reviewing the valuation. Similarly, a valuer’s costs of reviewing the leases are sometimes disallowed.

Decision in the appeal case

The Upper Tribunal reversed the decision of the First-tier Tribunal in disallowing the costs in relation to the counter notice, instructing a valuer and those costs incurred by a grade A fee earner as follows:

  • Service of the counter notice is a “necessary step to be taken if the landlord is to be able to advance its arguments regarding the valuation of the flat and the price to be paid”.
  • Costs incurred in instructing a valuer and considering the report were also necessary and reasonable.
  • It is reasonable to instruct a solicitor who has experience in this specialised area of law, including a grade A fee earner.    

Relevance

This decision provides some welcome guidance for landlords and clarity for tenants on which costs are recoverable when dealing with lease extensions, particularly in relation to the work on the counter-notice.


For further information, please contact the Real Estate Disputes team at Hamlins.

[1] Sinclair Gardens Investments (Kensington) Limited –v- Wisby (Application made under Section 91 of the Leasehold Reform Housing and Urban Development Act 1993)

[2] of the Leasehold Reform Housing and Urban Development Act 1993.

Have a question? Contact Kate

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