By virtue of Rule 13 of the Tribunal Procedure (First-Tier Tribunal) Property Chamber Rules 2013 the FTT may only make 3 types of costs order:
- Wasted costs order against a negligent legal representative
- Order against a party who has acted unreasonably in bringing, defending or conducting proceedings
- Order in a land registration case.
Orders 1) and 2) used to be limited to just £500, but this limit has now been removed.
Upper Tribunal
The Upper Tribunal, which deals with appeals from the FTT, is similarly restricted in its power to award costs by Rule 10 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010. This rule was recently considered in PAS Property Services Ltd v Mr & Mrs S D Hayes 2014 UKUT 0026 (LC) which provided a helpful summary:
Generally speaking, there are 3 types of order the Upper Tribunal has the power to make:
- Wasted costs order
- Costs order against a party or its representative who has acted unreasonably in bringing, defending or conducting proceedings
- The Tribunal fee
The Upper Tribunal (with limited exceptions) also has a general power to make an order against one or more of the parties in respect of costs where there is a disparity of interests or resources between the parties. This is exercised rarely in practice.
Contractual Costs
The idea behind limiting the powers of the FTT and Upper Tribunal is that in theory it makes access to justice less expensive.
It is important to note that the limited costs powers do not prevent parties from seeking costs on a contractual basis, in other words under the terms of the lease.
It is common for leases to provide for one party to pay the other party’s costs where there has been a breach of the lease.
However, such entitlement to contractual costs must be clearly worded. If a landlord of a long lease seeks to recover costs from tenants through the service charge or by way of variable administration charge, then those charges can also be challenged by the tenant under Section 20C of the Landlord and Tenant Act 1985 or under Schedule 11 of the Commonhold and Leasehold Act 2002 which specifies that administration charges are only payable to the extent that they are reasonable.