Proposed Amendments to the Leasehold Reform (Tribunal Judgments and Legal Costs) Bill
Mary-Anne Bowring 26/10/2022
2662
What is the Bill?
A new bill was introduced in September 2022 to amend the Landlord and Tenant Act 1985 and the Commonhold and Leasehold Reform Act 2002. This bill seeks to:
- Restrict landlords from claiming excessive legal costs.
- Make tribunal judgments mandatory for all leaseholders.
- Hold landlords accountable to all leaseholders.
The proposed changes aim to correct unfair legal cost recovery practices that currently favor landlords.
Key Issues in Landlord and Tenant Law
The bill addresses three major concerns:
- Landlords can recover legal costs from tenants even after losing a case, as permitted by the lease terms.
- Tribunal rulings only benefit participating leaseholders, meaning non-participants remain liable for unreasonable service charges.
- Landlords face no obligation to account for service charge adjustments to all leaseholders, leading to inconsistent financial burdens.
Current Legal Loopholes Favoring Landlords
Under the current system:
- If a landlord loses a legal case, only the specific tenants involved benefit from the ruling.
- Case law discourages passing legal costs onto tenants, but no legal restriction prevents it.
- Leaseholders must identify and challenge any unfair costs passed on through service charges.
This creates a flawed system where landlords can resist leaseholder challenges using leaseholders’ own funds.
The Problem with Service Charges and Legal Costs
Landlords often recover legal costs through:
- Service charges imposed on all leaseholders.
- Administration charges levied on individual leaseholders.
If some leaseholders challenge service charges and win, the landlord can still collect unreasonable charges from those who did not participate. This allows landlords to recover legal fees without financial consequences, reducing their incentive to settle disputes fairly.
Proposed Changes in the Leasehold Reform Bill
The bill proposes amendments to Section 20C of the Landlord and Tenant Act 1985, aiming to:
- Make cost orders binding on all leaseholders in a property, not just those who participated in the tribunal case.
- Cap landlord cost recovery to align with Civil Procedure Rules fixed costs, preventing excessive charges.
- Stop landlords from using service charges collected from other tenants to cover legal costs when they lose in court.
Impact of the Amendments on Leaseholders
If passed, the bill will:
- Ensure fair cost distribution across all leaseholders.
- Prevent landlords from exploiting legal loopholes to recover costs unfairly.
- Encourage landlords to settle disputes rather than prolong legal battles funded by leaseholders’ money.
This reform represents a major step towards fairness in leasehold law, shifting power away from landlords and providing better legal protections for leaseholders.
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