Service Charges and Applications to the LVT who pays?
S20C Landlord & Tenant Act 1985 is there to prevent an unpleasant shock for leaseholders.
It can happen that a leaseholder applies to the Leasehold Valuation Tribunal, wins, but is then surprised to find that the landlord’s costs of contesting the application have been added to the service charge. The landlord can do this if the lease entitles him to.
To stop this nasty sting in the tail, leaseholders can ask the Leasehold Valuation Tribunal for an order preventing the landlord adding the costs of the application to the service charge. This is called a “s20C Order”. Leaseholders can ask for a s20C order during the service charge case or afterwards by separate application. If the case is in the county court, the county court can make a s20C Order too.
Only those leaseholders participating in the application to the Tribunal can benefit from a s20C Order. For example, say there are four flats and only three leaseholders make an application to the Tribunal. Even if he loses, a landlord may be able to recover one quarter of the costs he incurred contesting the application from the non-participating leaseholder. Leaseholders might want to take note of this when trying to persuade others to join them.
All this sounds fair and sensible, but sometimes the Tribunal makes a s20C Order even when leaseholders only achieve very modest reductions. A landlord may have spent money and effort fighting an application, largely successfully, only to end up substantially out of pocket. Leasehold Valuation Tribunals were warned by a recent case in the Lands Chamber, Johnson & others v County Bideford Limited 2012 [UKUT] 457, of the need to make a proper reasoned decision on a s20C application.
Faced with a s20C application, it is worth landlords reminding the Tribunal that s20C allows it to disallow “all or any” of the landlord’s costs. In other words, if the Tribunal is going to prevent a landlord adding costs to the service charge, it doesn’t have to disallow all of them. I had a case recently acting for a landlord where, because the leaseholder was only partly successful, we managed to persuade the Tribunal to make only a 50% s20C Order. Not only did that seem to be a fair result, but it might discourage leaseholders from making nuisance applications in the future.