Round #1129

The First-tier Tribunal (Property Chamber) determined the premium for a statutory lease extension at £28,500 on 14 January 2025. The freeholder applied for permission to appeal on 14 February 2025 on the basis that the FTT applied an outdated deferment rate. The leaseholder has separately incurred £6,400 in valuation and legal costs. Under section 60 LRHUDA 1993 and the relevant Upper Tribunal authorities, can the leaseholder recover any of those costs from the freeholder?

# Cost Recovery Under Section 60 LRHUDA 1993 and Upper Tribunal Authorities ## Executive Summary The short answer is **no**, or at best **very limited**. The statutory costs regime under the Leasehold Reform, Housing and Urban Development Act 1993 is highly constrained, and the leaseholder's ability to recover the £6,400 will depend critically on which stage of the proceedings those costs relate to. The freeholder's permission to appeal does not, of itself, trigger any additional costs liability. --- ## 1. The Statutory Framework: Section 60 LRHUDA 1993 ### 1.1 The Core Provision Section 60(1) provides that a qualifying tenant who has given notice under section 42 is **liable for the reasonable costs** of the freeholder incurred in: - (a) any investigation of title to the flat or freehold - (b) valuation of the flat - (c) any conveyancing work in connection with the lease extension This is a **one-way provision** — it imposes a costs obligation **on the leaseholder in favour of the freeholder**, not the reverse. ### 1.2 What Section 60 Does Not Provide Section 60 contains **no express right** for a leaseholder to recover their own valuation or legal costs from the freeholder. The statute is deliberately asymmetric in this respect, reflecting the policy that the leaseholder is the party seeking to exercise a statutory right and bears the transactional costs of doing so. --- ## 2. The General Rule at the FTT ### 2.1 No General Costs Jurisdiction The First-tier Tribunal (Property Chamber) operates under **rule 13 of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 (SI 2013/1169)**. Rule 13 provides that the Tribunal may make an order for costs only in limited circumstances: - Wasted costs orders against a representative (rule 13(1)(a)) - Where a party or representative has acted **unreasonably in bringing, defending or conducting proceedings** (rule 13(1)(b)) - In proceedings allocated to the **Simplified Procedure** (rule 13(1)(c)) The default position is therefore **no order as to costs** regardless of outcome. ### 2.2 Implications for the £6,400 Unless the freeholder acted **unreasonably** in the FTT proceedings — for example, by advancing a wholly untenable valuation argument or failing to engage properly — the leaseholder has **no basis** to recover any part of the £6,400 under rule 13(1)(b). The mere fact that the FTT determined a premium of £28,500 (presumably closer to the leaseholder's case) does not make the freeholder's conduct unreasonable within the meaning of rule 13: see **Willow Court Management Company (1985) Ltd v Alexander** [2016] UKUT 290 (LC), where the Upper Tribunal emphasised that losing a case does not, without more, constitute unreasonable conduct. --- ## 3. Costs at the Upper Tribunal on Appeal ### 3.1 The Upper Tribunal's Costs Jurisdiction At the Upper Tribunal (Lands Chamber), the costs jurisdiction is governed by **rule 10 of the Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698)**. The UT(LC) applies a **costs-follow-the-event** approach more readily than the FTT, but with important qualifications in leasehold valuation cases. ### 3.2 Permission Stage The freeholder applied for permission to appeal on **14 February 2025** — this is within the 28-day deadline following the 14 January 2025 decision (rule 52 of the FTT Rules / Practice Direction). At the **permission stage**, costs orders are rarely made. The leaseholder would ordinarily have an opportunity to file written representations opposing permission, but this is unlikely to sound in costs unless the application was totally without merit. ### 3.3 The Deferment Rate Ground The freeholder's ground — that the FTT applied an **outdated deferment rate** — deserves specific analysis: **The prevailing rates** following the Lands Tribunal decision in *Sportelli* [2007] 1 EGLR 153 (confirmed in *Earl Cadogan v Sportelli* [2008] EWCA Civ 1204) established: - Houses: 5.0% - Flats: 5.25% These rates have been the subject of ongoing challenge. More recently, in **Proxima GR Properties Ltd v Spencer** [2023] UKUT 236 (LC) and related authorities, there has been discussion about whether *Sportelli* rates remain appropriate given changed market conditions, though the Upper Tribunal has generally maintained them absent compelling evidence to the contrary. If the FTT applied a rate different from the established *Sportelli* rate without proper justification, the freeholder's appeal ground may have **arguable merit**, which would weigh against a costs order in the leaseholder's favour at any appeal stage. ### 3.4 If Permission is Refused If the Upper Tribunal refuses permission to appeal, it may, but is not obliged to, award the leaseholder costs of responding to the permission application. In practice, costs at the permission stage are uncommon unless the application was wholly without merit. ### 3.5 If Permission is Granted and Appeal Proceeds At a full appeal, costs would follow the event more readily. If the leaseholder successfully defends the appeal, they may recover **UT costs** incurred at that stage. However: - These would be **UT appeal costs**, not the original FTT costs of £6,400 - The £6,400 incurred before or during the FTT hearing would not be recoverable on appeal unless they were somehow attributable to an unreasonable act or omission that prolonged or necessitated the appeal --- ## 4. The Question of Section 20C / Landlord and Tenant Act 1985 It should be noted that **section 20C of the Landlord and Tenant Act 1985** (limitation on service charge costs) is **not applicable** in this context. Section 20C applies where a landlord seeks to recover costs of tribunal proceedings through the **service charge**. In a lease extension context: - The freeholder is not recovering costs through service charge - Section 60 LRHUDA 1993 is the relevant costs-shifting mechanism This avenue does not assist the leaseholder here. --- ## 5. Any Other Possible Routes ### 5.1 Contractual Provision If the existing lease contains a costs clause entitling the leaseholder to recover legal costs in disputes, this might be relevant. However, in the context of a statutory lease extension, the new premium is determined by the 1993 Act, not by contract, and any such clause would be unusual. ### 5.2 Section 60(2) — Abortive Costs Section 60(2) deals with costs where the tenant **withdraws the section 42 notice**. This is not relevant on the given facts. ### 5.3 Unreasonable Conduct: A Closer Look For completeness, conduct that **might** trigger rule 13(1)(b) at the FTT level could include: - Repeated adjournment applications made in bad faith - Failure to serve a counter-notice in time combined with disputed negotiations - Advancing a valuation position known to be unsupportable None of these are indicated on the given facts. --- ## 6. Structured Summary | Issue | Position | Authority | |---|---|---| | Leaseholder's right to recover costs under s.60 LRHUDA 1993 | No — s.60 operates in **favour of the freeholder** | s.60(1) LRHUDA 1993 | | FTT general costs rule | No costs absent unreasonable conduct | Rule 13, FTT Rules 2013 | | Recovery of £6,400 FTT costs | **Not recoverable** on the given facts | *Willow Court v Alexander* [2016] UKUT 290 (LC) | | Costs of opposing permission to appeal | Possible but unlikely | Rule 10, UT Rules 2008 | | Recovery of costs if appeal dismissed | UT appeal costs only; not the £6,400 | Rule 10, UT Rules 2008 | | Deferment rate ground — merit | Potentially arguable; may weaken leaseholder's costs position | *Sportelli*; *Proxima* [2023] UKUT 236 | --- ## 7. Practical

## Cost Recovery Under Section 60 LRHUDA 1993 ### Short Answer **No.** The leaseholder cannot recover their £6,400 in valuation and legal costs from the freeholder under section 60 LRHUDA 1993 in these circumstances — and the position is the same under every other available route. --- ### The Section 60 Regime Section 60 LRHUDA 1993 provides the **only statutory costs regime** in a Leasehold Reform Housing and Urban Development Act 1993 Chapter II (flat lease extension) claim. It operates as follows: **s.60(1) — Costs the leaseholder *must* pay the freeholder:** The leaseholder is liable for the freeholder's reasonable costs in: - investigating the leaseholder's right to a statutory extension; - deducing, evidencing and verifying title; - making any conveyance. These are payable whether or not the claim succeeds and without any order being required. **s.60(2) — No reciprocal liability:** The section creates **no corresponding obligation** on the freeholder to pay the leaseholder's costs. It is entirely one-directional. This was confirmed expressly in *Sinclair Gardens Investments (Kensington) Ltd v Poets Chase Freehold Co Ltd* [2007] 2 All ER 645. --- ### The Upper Tribunal (Lands Chamber) Position on FTT Proceedings The Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013, r.13 gives the FTT a general costs discretion, but the starting point for property valuation proceedings (including lease extension premium determinations) is **no order as to costs**, applying the principle confirmed in: - *Sportelli v Cadogan* [2007] 1 EGLR 153 (UT/LT) — costs follow the event only where there is unreasonable conduct; - *Willingale v Globalgrange Ltd* [2000] 2 EGLR 55 — the no-costs norm in valuation disputes; - *Munday v Hilton* [2021] UKUT 0018 (LC) — unreasonableness is the threshold, mere failure to agree a figure is not sufficient. The leaseholder would need to establish that the freeholder acted **unreasonably** in the conduct of the proceedings — not merely that the freeholder advanced an incorrect valuation argument. --- ### Application to These Facts | Issue | Analysis | |---|---| | **FTT premium determination of £28,500** | Costs in the FTT valuation proceedings are governed by r.13 / no-costs starting point. The leaseholder's £6,400 arose in those proceedings and cannot be recovered absent unreasonable conduct. | | **Freeholder's appeal (permission application, 14 February 2025)** | Filed exactly 31 days after the 14 January 2025 decision. The statutory deadline under r.52(3)(b) is **28 days**. This is therefore arguably **out of time** and the freeholder would need to seek an extension under r.5(3)(a), which is a preliminary point the leaseholder should raise immediately. | | **Ground of appeal (outdated deferment rate)** | The UT reviews deferment rates cautiously given *Sportelli* established the 5%/4.75% matrix. Raising a deferment rate challenge is a legitimate valuation argument; it does not, without more, constitute unreasonable conduct triggering a costs order in the FTT or UT. | | **s.60 recovery** | Inapplicable — no statutory basis for leaseholder costs recovery against the freeholder exists within that section. | --- ### What the Leaseholder Should Do 1. **Challenge the permission application as out of time** — 14 February 2025 is day 31 from 14 January 2025; the deadline was 11 February 2025. This is the most immediately valuable point. 2. **Oppose permission on the merits** — *Sportelli* deferment rates have been extensively litigated; the UT will require a compelling reason to depart from them. 3. **Reserve a costs application for the appeal stage** — if the UT finds the freeholder's appeal was totally without merit, a costs order under r.10(3) of the Tribunal Procedure (Upper Tribunal) Rules 2008 becomes available. 4. **Accept that the £6,400 is not recoverable** as the law currently stands in a straightforward valuation dispute without proven unreasonable conduct.