Recouping the cost of troublesome tenants

Landlords and management companies will be interested in a recent decision that makes it possible for a landlord to recover legal costs as part of the service charge paid by his tenants, even though there may be no such express provision within the lease.

In the case, Plantation Wharf Management Company Ltd v Jackson and another, the claimant was the management company of Plantation Wharf, a 13-block development containing both commercial units and residential flats.

The defendants were two of the residential tenants who, for two years, had failed to pay the service charge due to the landlord, claiming the sums were unreasonable. The landlord disagreed and sued for the outstanding charges.

Part of the tenants’ argument was that the service charge included legal costs incurred by the landlord in suing his defaulting tenants. They claimed that the lease did not allow this as it did not expressly state that legal costs were one of the landlord’s recoverable expenses.

The Leasehold Valuation Tribunal decided in the tenants’ favour, but the decision was reversed on appeal. Although the words ‘legal costs’ were not contained in the lease, it was still clear that the tenants should be liable for the costs incurred by the landlord in taking action against defaulting tenants and these costs should be collected via the service charge.

This is a good outcome for landlords. In previous cases courts have ruled that there must be clear and unambiguous terms in the lease that allow the landlord to pass on such costs. This new decision broadens the scope for costs recovery and will be helpful for landlords concerned about the cost of dealing with troublesome tenants.

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