Most modern residential leases include a provision to enable a landlord or management company to recover their legal costs from their leaseholders through service charges. This will usually enable legal costs. For example, when a management company ends up in litigation with any leaseholder(s). This could be to pursue recovery of unpaid service charges. And when this happens, money can be recovered via the service charges. However, Section 20C of the Landlord and Tenant Act 1985 allows a residential leaseholder to apply for an order that states that when the landlord or management company incurs costs in connection with any proceedings before a Court or Tribunal they do not go under “relevant costs” when determining the amount of service charges payable by that leaseholder “or any other person specified in the application”.
More information about Section 20C
A successful Section 20C application will result in the landlord or management company being unable to recharge their legal costs through the service charge; having to bear the costs from their own pocket. Section 20C applications commonly occur when leaseholders file applications to the FirstTier Tribunal (“the FTT”). Such applications determine the payability and/or reasonableness of service charges. There is no time limit for making such an application and any leaseholder can apply.
A leaseholder does not have to be a party to the original application to seek a Section 20C costs order later. Courts and Tribunals have a wide discretion when it comes to making a Section 20C order. And they may make “such order on the application as it considers just and equitable in the circumstances”.
It was said that if it was the intention of those drafting the Landlord and Tenant Act 1985 to provide a remedy in such circumstances. When expressing that intention clear language needs to be used. TA Section 20C order can only be sought on behalf of those who had consented or had given authority.
When taken with the specific wording, this piece of regulation potentially gives landlords and management companies an easy way to limit the impact of Section 20C orders. However, it is hard not to see the result as a somewhat hollow victory. The result would, of course, benefit a landlord or management company. This would happen in circumstances in which the other leaseholders had no interest in challenging the costs. Or in case they would not want to pursue a Section 20C order. But it was always open to those other leaseholders to seek a Section 20C order in some cases.