The County Court recently considered the amount of legal costs that are recoverable in a disrepair claim that settled pre-issue. Stathis Kosteletos and Elena-Lucia Singleton analyse the ruling.
In Jalili v Bury Council the claimant, Ms Jalili, pursued a disrepair claim against her landlord, Bury Council. At the pre-action stage, the claimant’s expert set out a list of remedial works in the sum of £3,915 on an 'open market' basis. However, the defendant’s expert set out a more limited schedule of works in the sum of £740 and costed on an 'in-house' basis.
The defendant completed their proposed works and the claimant was satisfied that this solved the underlying issues and no claim for specific performance was pursued any longer. In respect of the claimant’s claim for damages, she offered £1,500 and the defendant counter offered at £1,000, which the claimant accepted.
As the parties could not agree on costs, a Part 8 claim was issued for this remaining point of dispute and the court ordered that the defendant to pay the claimant’s costs, such costs to be determined by detailed assessment on the standard basis if not agreed.
Relevant CPR provisions
The Pre-Action Protocol for Housing Conditions Claims states at paragraph 11 that “if the tenant's claim is settled without litigation on terms which justify bringing it, the landlord will pay the tenant's reasonable costs".
Civil Procedure Rules (CPR) 36.13(3) provides that, where the court is asked to assess costs on the standard basis in a claim that was concluded without it being allocated to a track, the court may restrict those costs to costs that would have been allowed had the court been allocated to the relevant track.
CPR 26.6(b) provides that the small claims track is the normal track for a claim brought by a tenant of residential premises against his landlord where:
- the tenant is seeking specific performance, whether or not other remedies are sought;
- the costs of the repairs/other works to the property are no more than £1,000; and
- the value of any other claim for damages is no more than £1,000.
The Court of Appeal had previously offered guidance regarding the interpretation of CPR 26.6(b)(ii), namely that “providing there is a claim for specific performance, a tenant’s claim in a disrepair case will be a fast track case if either the cost of repairs or the consequential damages claim exceeds £1,000”.
Outcome of hearing
At the detailed assessment hearing, the claimant argued that, had the claim for disrepair been issued, it would have been allocated to the fast track based on their expert’s schedule of works and costing on the open market basis. It was argued that instructing solicitors to act on her behalf had been necessary as the Pre-Action Protocol is complex and that an unscrupulous landlord could deliberately adopt a policy of carrying out repairs without admitting liability after receipt of the letter of claim in order to reduce the value of the claim and thus have it allocated to a lower track.
The court rejected this argument and commented that the tenant’s reasonable costs ultimately depended on the value of the claim for repairs. As the defendant would have been seeking an order for specific performance, the court would have ordered the defendant to put right the disrepair as part of the specific performance order. The court could not have imposed on the defendant how to carry out the works, merely that it would have to carry out remedial works. The defendant was a local authority and it was common knowledge that, as such, the defendant would have an in-house team of relevant professionals to undertake the works, therefore the court held that the claimant’s surveyor’s basis of valuing the required works was flawed. The court held that, as the defendant would have carried out the work themselves, the valuation of work carried out by their expert was the more appropriate basis. The court held that, on the balance of probabilities, the claim would have therefore been allocated to the small claims track.
Furthermore, the court commented that the claimant had in fact agreed to the works identified by the defendant’s surveyor and that those works were carried out to the satisfaction of the claimant, therefore the claim for specific performance had fallen away in any event.
There are a number of important takeaways for landlords in this case, despite the fact that this decision will not be binding on other courts.
The first point is the importance of inspecting the property and preparing a report and/or schedule of proposed work at an early stage in the dispute. It is then important for a landlord to at least carry out the works that their own expert has identified as necessary while discussions on what other works are needed continue.
The second point is that the judge took a common sense approach when considering the experts’ method for valuing the costs of the works. It is usual for local authorities and registered providers of social housing to have their own in-house repairs team, meaning that works can be carried out and costed in-house rates, which are usually lower than open market rates. In addition, large organisations usually achieve economies of scale and are able to negotiate down costs as opposed to using open-market contractors.
Thirdly, claimants could be less motivated to accept settlement offers less than or equal to £1,000 so it may be the case that landlords should be prepared for more counter offers and protracted negotiations.
For more information on what to consider when recovering legal costs in social housing matters, please contact Clive Adams or another member of Birketts’ Social Housing Team.