Can landlords recover their legal costs from tenants?
The general rule in litigation is that the loser pays the winner’s reasonable and proportionate costs. However this rule does not always apply.
If the claim is a ‘small claim’ (generally speaking when the amount claimed is below £10,000) the winner is only entitled to fixed costs, which will represent a tiny fraction of the landlord’s actual costs if they are legally represented. In the residential Property Tribunal, the usual rule is that each party bears their own costs, unless someone has acted unreasonably.
But what if the lease includes an obligation that the tenant pays the landlord’s costs of pursuing the tenant for arrears, or enforcing breaches of covenant? A recent Court of Appeal decision has confirmed that this wording allowed the landlord to recover costs it would not otherwise get back, because the wording of the lease takes precedence over the court rules.
In Chaplair v Kumari the court confirmed the tenant did have to pay the landlord’s costs of both a small claim in the county court, and a residential Property Tribunal application, because the lease permitted recovery of legal costs.
Commercial and residential leases often include covenants obliging the tenant to pay the landlord’s costs ‘on a full indemnity basis’. In larger court claims, this kind of wording will probably also override the general court rule that limits costs to those that are ‘reasonable and proportionate’.
It is important to bear in mind that the award of costs is always at the discretion of the court. If a landlord loses the claim they won’t be entitled to recover their costs, whatever the lease says!