What is the Bill?

Proposed Amendments to the Leasehold Reform Bill

A bill to amend the Landlord and Tenant Act 1985 and the Commonhold and Leasehold Reform Act 2002 was introduced in September 2022. The bill aims to restrict the right of landlords to claim legal costs in excess of a proposed scale. It also aims to make tribunal judgments mandatory for all leaseholders and makes the landlords accountable to all leaseholders.

This Bill addresses three key issues that arise in landlord and tenant law.

A landlord who loses legal proceedings can still recover the total costs of the proceedings from the tenant as stated in terms of the lease. When tenants succeed in obtaining orders limiting landlord costs, the ruling only binds the leaseholders who are part of the proceedings. When some tenants are able to obtain orders limiting service charges, the landlord is not obliged to account to other leaseholders for the relevant charges.

Currently, if the landlord loses proceedings in a court and faces a costs order, it applies only to the relevant parties involved in the proceedings. Despite the case law stating that a landlord should not pass on any costs under the service charges, legally, they cannot be stopped from doing so. The onus is on the leaseholders to detect the costs that have been passed on.

Only then can they challenge the landlord. Tribunal proceedings are also allowed to conclude that service charges are not reasonable and should be reduced. A landlord needs to refund charges only to leaseholders participating in the challenge. They can continue to collect unreasonable charges from non-participating leaseholders.

This illogical rule allows landlords to spend leaseholders’ money to resist the challenges of those opposing the service charges. They can recover the legal costs by collecting service charges from non-participating leaseholders. It creates a situation where the landlords are under no legal pressure to settle. These issues arise because the terms of most leases are designed for landlords to recover their legal costs through the service charge or by administration charges against individual leaseholders. It seems that the rules are strongly tilted in favour of the landlord.

The new bill aims to change section 20C of the Landlord and Tenant Act 1985.

It will make cost orders against the landlord binding on the landlord and all tenants in properties owned by the same landlord. The amendment also aims to limit the amount the landlord can recover from service charges to the amount allowed according to the Civil Procedure Rules fixed costs rule. This change in law will prevent a landlord who has lost their case in court and must pay the costs to a tenant who has won the case by using the service charges collected from other tenants to make that payment.