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Paying the price for leasehold disputes

Now that the Court of Appeal has widened the scope of a common costs clause, landlords and tenants must ensure that such clauses are clearly drafted to avoid expensive and protracted litigation, says David Sawtell

23 April 2012

Leasehold disputes can result in difficult and expensive litigation. Whatever the outcome, both landlords and tenants will be concerned about who will, ultimately, pay those costs. Most commercial and long residential leases contain provisions about the recoverability of the landlord’s legal costs, often by way of a service charge demand. A landlord can become unstuck in the forest of case law and statutory provisions that govern whether or not he can recover his costs. Sometimes it will be necessary to proceed through the Leasehold Valuation Tribunal (LVT). Traditionally styled as a ‘no costs arena’, the recent Court of Appeal case of Freeholders of 69 Marina v Oram and Ghoorun [2011] EWCA Civ 1258 has enhanced the prospects of a landlord seeking to claw back his legal costs incurred in the tribunal.

The lease in dispute in Freeholders of 69 Marina contained a typical covenant for the recoverability of the lessor’s costs in relation to section 146 of the Law ...

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