Avon Grounds Rents Limited v Kirstie Ward

Orders under section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 are discretionary and do not follow the event. They interfere with a landlord’s contractual right to recover costs, so careful consideration is required, particularly where the landlord succeeded in the underlying proceedings. Relevant considerations may include whether the proceedings could produce any practical benefit, whether they were necessary to enforce another contractual obligation, and the parties’ conduct. A landlord’s pragmatic purpose in obtaining a breach determination under section 168 does not, by itself, make its costs recoverable under the lease or justify allowing recovery where forfeiture has been waived and the proceedings are effectively pointless.

Avon Grounds Rents Limited, the freeholder, appealed against the First-tier Tribunal’s decision to make orders under section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. Those orders prevented recovery through service or administration charges of the landlord’s costs in successful proceedings under section 168 of the 2002 Act, in which the respondent was found to have breached lease covenants.

The landlord argued that the section 168 proceedings had practical value because they could support forfeiture, damages, an injunction, or enforcement of a separate repair-cost covenant. It also argued that the respondent’s lack of personal fault was irrelevant. The central issues were whether the FTT had considered irrelevant matters and whether its discretionary costs orders were legally open to it.

1. The appeal was dismissed. The Upper Tribunal would interfere with the FTT’s discretionary decision on costs only if it fell outside the range of decisions reasonably open to the FTT.

2. Orders under section 20C and paragraph 5A are not ordinary costs orders following the event. They interfere with a landlord’s contractual right under the lease. It is therefore unusual to make them where the landlord has succeeded, and careful consideration is required before preventing contractual cost recovery.

3. Bedford v Paragon Asra Housing Association Limited [2021] UKUT 266 (LC) concerned whether section 168 proceedings should be struck out as abusive after waiver of forfeiture. It established that other remedies could remain available. The present appeal concerned a different question: whether the landlord should recover its costs through service or administration charges. The authority was therefore distinguishable.

4. The FTT was entitled to find that the proceedings were effectively pointless insofar as they were brought in contemplation of a section 146 notice. The landlord would obtain no benefit from forfeiture proceedings, and the section 168 determination was not a necessary precursor to enforcing the separate contractual obligation to pay repair costs. The landlord’s pragmatic objective of making that enforcement easier did not itself engage the contractual right to recover the costs of proceedings brought for a different purpose.

5. The parties’ conduct was also relevant. The landlord’s insistence on pursuing forfeiture after waiver was unmeritorious, even if its officers were unaware of the waiver. The FTT was also entitled to take account of the fact that the respondent had not herself caused the damage, which resulted from the plumber’s work.

6. The FTT’s reference, when refusing permission to appeal, to county court proceedings was not a reason for its original decision and did not undermine it.

• Upper Tribunal (Lands Chamber): The appeal against the First-tier Tribunal’s discretionary orders under section 20C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 was dismissed.