Important costs victory for landlords10 Aug 2015
Many claims by landlords can often be for an amount of less than £10,000. The relevance of this figure is that if those proceedings are pursued in the County Court, they will be allocated to what is known as the Small Claims Track (SCT).
The Civil Procedure Rules that govern County Court claims say that the Court cannot order the payment of any costs other than the costs of issuing the claim (somewhere in the region of £260) in SCT cases. However, the costs the landlord incurs will be significantly higher than the Court fee allowed under the SCT.
The question then arises, is it worth the landlord issuing proceedings against a tenant for less than £10,000?
A recent case has proved that the answer to this question may be “yes”, as a landlord’s lease will sometimes have a contractual term, which says that the landlord can recover costs they incur in respect of proceedings, expenses or demands arising out of their tenant’s failure to observe or perform obligations under the lease.
In a Court of Appeal decision given at the end of July 2015, the Court allowed the landlord to recover its costs on an indemnity basis in what was an SCT claim. This is the case of Chaplair Limited -v- Kumari  EWCA Civ 798.
The starting point is that an Order for the payment of costs in any civil proceedings by one party to another is always discretionary. However, where there is a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect the contractual right. The person entitled to recover costs under their contract (in this case it would be a lease) is not to be deprived of those contractual rights where they have been claimed in the proceedings, unless there is a good reason to do so.
It has been suggested that reasons where it would not be appropriate for someone to recover contractual costs is if they were incurred as a result of improper, unreasonable or negligent conduct on the landlord’s behalf, or on behalf of their legal or other representatives. It is also arguable that the costs should be reasonable.
The lesson to be learned is that a landlord who is owed up to £10,000, and who has a contractual provision in their lease allowing them to recover costs of proceedings where a tenant has breached the terms of the lease, should not be deterred from pursuing a claim simply by the fact that the claim would be normally allocated to the SCT.
However, it is extremely important that the claim is properly set out to avoid the tenant being able to argue that the landlord did not claim those costs in the proceedings.
If you want any further advice on the points raised in this article or to discuss other landlord and tenant matters, please contact us or call Andrew Weinberg on 0161 832 3434.