Overview of the recent case Thanet Lodge (Mapesbury Road) RTM Company Limited v Arun Mirchandani (2024) UKUT 205 (LC) in respect of recovery of legal fees as service charge in respect of the Right to Manage claim.
The Upper Tribunal has ruled in the above case that legal costs incurred by the RTM company are not permitted to be recovered through the service charge as the lease does not provide recovery of these costs.
Background
The applicant is the RTM company incorporated by the leaseholders to exercise the right to manage the building under the Commonhold and Leasehold Reform Act 2002. The respondent holds a long lease however he is not a member of the RTM company. The RTM company has attempted to recover its legal costs in respect of advice about the membership and constitution of the RTM company via the service charge. Mr Mirchandani applied to the First Tier Tribunal for determination that the costs were not reasonably incurred, and the lease did not permit the RTM Company to recover them via the service charge.
The RTM company argued that the costs were recoverable under the following clause of the lease allowing “(i) to employ at the Lessors’ discretion a firm of Managing Agents and Chartered Accountants to manage the Building and discharge all proper fees salaries charges and expenses payable to such agents or such other person who may be managing the Building including the cost of computing and collecting the rents and service charges in respect of the Building or any parts thereof and (ii) to employ all such surveyors builders architects engineers tradesmen accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building”.
The RTM company further argued that if legal costs cannot be recovered under a total expenditure clause, then they should be permitted under the provision “any other costs and expenses reasonably and properly incurred in connection with the Building.”
The Tribunal’s decision
The tribunal has concluded that the cost of advice on the membership of the RTM company was not contemplated by the lease and therefore was not recoverable under the lease.
Conclusion
Recovery of legal costs and other expenses depends on the wording of the specific lease. It is therefore important to seek professional legal advice on the lease and recoverability of legal costs.
Contact our Litigation & Dispute Resolution Teams
Tatsiana Rao is a Solicitor in the Litigation & Dispute Resolution team. Should you require any further advice or assistance, please contact us at litigation@bishopandsewell.co.uk or call her, on 0207 7079 2410.
The above is accurate as at 05 September 2024. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case by case basis.
