Costs in English possession claims

Costs in English possession claims

1. As we approach the two-year anniversary of the introduction of the extended fixed costs regime (“EFCR”), what better time to dig into the dry but important question of costs in possession claims? In many cases, the answer is that the EFCR does not apply but finding the reasons why can require a circuitous route through CPR Part 45 and its matching Practice Direction. This short article aims to draw together the technical elements together in one place, at least in respect of the most common possession claim scenarios, as well as answering a few common queries arising from costs in possession claims. As I say, dry but important.

Possession claims which are determined at a first hearing

Scenario 1: section 8 Housing Act 1988 claims

2. Most tenancy agreements contain contractual cost clauses. It is well-established that where a contractual cost clause is present, and provided it is engaged (typically they require a breach on the part of the tenant), the court will generally depart from any fixed cost regime in favour and hold the tenant liable for the landlord’s costs of bringing the possession claim. A long line of cases support this approach; Church Commissioners for England v Ibrahim; [1996] 2 WLUK 175; Chaplair Ltd v Kumari [2015] EWCA Civ 798.
3. In my view, whilst this is plainly engaged in rent-arrear grounds 8, 10 and 11, it would require a very favourably drafted costs clause and/or definition of tenant’s covenants to engage, for example, ground 6 (the demolition/substantial works ground).
4. Where contractual costs clauses are engaged the court will of course not grant everything claimed unless it is satisfied the costs are reasonable and proportionate (or just reasonable if costs are owed on the indemnity basis).
5. There is nothing in the approach of the courts since the introduction of the EFCR which suggests the approach towards contractual cost clauses at first possession hearings has changed at all.
6. In the unusual situation a tenancy agreement does not have contractual costs clause then the landlord at a first hearing will be within the EFCR with differing sums depending on the tenant’s response to the claim. In most cases, where the tenant does not “deliver” a Defence (a term wider than serving a CPR-compliant Defence), the landlord will be ordered fixed costs totalling £530.75, i.e. (i) the issue fee of £404; Civil Proceedings Fees Order 2008 (“CPFO 2008”), Sch 1, para 1.4(b); plus (ii) the fixed commencement cost of £69.50 (where, as is normal the court serves the Claim Form); CPR 45.20(1) and PD 45 Table 4; plus (iii) the fixed costs on entry of judgment at £57.25; CPR 45.21 and PD 45 Table 5(1)(b).

Scenario 2: section 21 Housing Act 1988 claims

7. Section 21 “no fault” possession claims will be consigned to the dustbin of legal history once the Renters Rights Bill commences and any transitional period comes to an end but that is likely a few years away at this stage and so it remains a highly relevant topic (particularly as many landlords consider retaking possession early to avoid the legislative reforms).
8. Unlike section 8 possession claims where the landlord can typically rely on a contractual costs clause in the tenancy agreement. In most section 21 possession claims where the landlord has used the accelerated possession claim route set out in Section II of CPR Part 55 (i.e. using Forn N5B and there is no additional claim for arrears) in most instances in the County Court, the landlord will fall within the scope of the EFCR and be entitled to the sum of £483.50, being the issue fee of £404; CPFO Sch 1, para 1.4(b) and the fixed cost on entry of judgment of £79.50; CPR 45.21 and PD 45, table 5.
9. In the event that the tenant defends the claim or simply makes an application a possession order to bite in 6 weeks on the basis of exceptional hardship per section 89 of the Housing Act 1988 leading to a hearing being listed, costs are likely to become an open issue and the EFCR will be departed from. If the court lists a hearing on its own motion instead of ordering possession on the papers, usually because it needs to be satisfied on some eligibility requirement, then the EFCR will still apply because it is not the defendant tenant who has led to a hearing being listed.
10. If a section 21 claim is brought by a claim for arrears is made (i.e. the accelerated possession claim route is not used) then in my view such a claim would not be within the scope of the EFCR at a first hearing as it does not fall within any of the categories of CPR 45.16(2)(b).

Scenario 3: possession claims against trespassers

11. A claim against a trespasser does not fall within the scope of Section II of the EFCR (i.e. it does not fall within any of the categories of CPR 45.16(2)(b) and hence costs are at large.

Possession claims which reach a trial

12. Whatever the nature of the possession claim (section 8, section 21, trespassers), then the matter will be outside the EFCR: the provisions of Section II (which deal with costs at a first possession hearing) have ceased to be relevant at trial and Section VI (fast track fixed costs) and Section VII (intermediate track fixed costs) do not apply to any claim (or counterclaim) which relates whole or in part to a claim for possession or residential land (other than in the context of boundary disputes); CPR 45.1(4)(a).

A few miscellaneous relevant provisions

13. What if the defendant is legally aided? Whatever the outcome of the case if matters have gone beyond a first hearing, the tenant’s legally aided costs will be subject to assessment.
14. What if a Statement of Costs is not served within 24 hours of the hearing as required by CPR PD 44, para 9.5(4)(b) or two clear days if the matter reached a fast track trial per para 9.5(4)(a)? The answer lies in MacDonald v Taree Holdings Ltd [2000] 12 WLUK 168 where Neuberger J, as he then was, held that such non-compliance should be met by a proportionate response relative to any prejudice non-compliance has caused: if there is no aggravated factor and the paying party is not prejudiced, the court should continue to assess costs in the usual way. If there is prejudice or some aggravating factor (perhaps repeated non-compliance by the landlord), there are three appropriate responses: (i) a brief adjournment to allow the schedule to be considered (with the court leaning towards a light figure over a heavy one in the event of any doubt); (ii) adjourn the question of costs to a detailed assessment or (iii) adjourn the question of costs to another hearing for a summary assessment. Whichever route is adopted, it may be appropriate to deprive the receiving party of a portion of the costs they might otherwise be awarded.
15. In my experience, this all turns on the pragmatism of the judge in question but option (ii) would be unheard for a first hearing and option (iii) is very unlikely, both being disproportionate wastes of the court’s time and resources.
16. What if the amount claimed in the statement of costs exceeds the solicitor’s guideline rates? Whilst the guideline rates are “guidelines”, the court often applies these relatively strictly and is likely to make a deduction in line with the guideline rates, which is not surprising given repeated higher authority statements to the effect that departing from the guideline rates requires a “clear and compelling justification”; Athena Capital Fund v Secretariat of State for the Holy See [2022] EWCA Civ 1061. In nearly every case there is unlikely to be such a justification and the receiving party should expect a reduction unless the overall figure claimed when looked at is reasonable and proportionate.
17. What if a landlord is VAT registered? This is often mistakenly claimed in statement of costs: a VAT registered landlord cannot claim the VAT as part of an inter partes costs order; PD 44 para 2.3.

Article by William Golightly