Upper Tribunal sets aside costs order against resident who said he had been wholly successful - save for 30 pence – in service charge dispute

Judge Elizabeth Cooke concluded that the FTT’s decision “cannot be regarded as fair and so falls outside [its] discretion.”

Resident Luke Jamieson had won his case over the correct calculation of his service charge by L&Q but the FTT had still said he had to pay half its costs as part of his argument had been wrong.

Judge Cooke noted cases about leasehold administration charges can be complex and costly, and many leases allow a landlord to recover its costs of legal proceedings through the service charge leading to “the paradoxical position that a tenant might successfully challenge a service charge and yet have to pay their landlord's legal costs”.

She said to avoid this section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of the Commonhold and Leasehold Reform Act 2002 gave the FTT discretion.

Mr Jamieson holds a shared ownership lease of flat where L&Q is his landlord but is not the freeholder.

L&Q holds a headlease under which it pays a service charge to the freeholder. It does not provide services itself, but passes to its tenants the relevant proportion of the service charge it pays, and also charges them for dealing with accounts, estimates and budgets.

Mr Jamieson and his neighbours therefore pay a service charge defined in part as a proportion of his landlord's liability under the headlease. The lease requires the leaseholder to pay an estimated service charge in advance and to make a balancing payment if more is needed.

Disagreements over how the charge was calculated and when payments were due saw L&Q claim £3,049.98 from Mr Jamieson, whose own calculations indicated this should be only £2,548.68.

The FTT agreed with Mr Jamieson but still said he must pay half of L&Q’s costs because the interlocking covenants in the lease and the superior lease were not straightforward and although Mr Jamieson had been partially successful, part of his argument was wrong where he had interpreted an invoice as amounting to a three months advance payment.

Judge Cooke said the FTT’s judgment that this argument was wrong “seems to me to be irrelevant and unfair.

"[Mr Jamieson] was right: in the first, incomplete, service charge year he was required to pay only an apportioned amount of the costs incurred by the landlord under the headlease. He was therefore being overcharged.

“The way he put it was to say that he was being asked to pay costs in advance; the FTT put it differently, but that seems to me to be quite immaterial to the fact that the applicant was entirely successful.”

She also said the FTT’s assertion that the lease provisions were not straightforward was not a relevant consideration.

Judge Cooke concluded: “I take the view that the order made by the FTT cannot be regarded as fair and so falls outside the bounds of the FTT's discretion. I set it aside…”

Mark Smulian