Legal costs in disrepair cases - the decision in Jalili v Bury Council

Background 

In Jalili v Bury Council, the court considered the amount of legal costs that were recoverable by a tenant in a disrepair claim brought against their council landlord that settled pre-issue of proceedings.

The tenant’s expert surveyor set out a list of remedial works however, the landlord’s expert surveyor set out a more limited schedule of works which were valued at less than £1,000.

The landlord completed their own proposed works, and the tenant was content with those works. The landlord agreed to pay £1,000 in damages to the tenant. However, the parties were unable to agree on costs and this was the issue before the Court.

Relevant considerations

The Pre-Action Protocol for Housing Conditions Claims which applies to disrepair claims states at paragraph 11 that “if the tenant's claim is settled without litigation on terms which justify bringing it, the landlord will pay the tenant's reasonable costs".

When deciding what the tenant’s reasonable costs are the Court will have regard to Civil Procedure Rule 36.13(3) which provides that if a claim was concluded without being allocated to track and the Court has to assess the costs on a standard basis, the Court can restrict the costs to those which would have occurred had it been allocated to the relevant track.

CPR 26.6(b) provides that when a tenant brings a claim against their landlord it will be allocated to the small claims track where:

• the tenant is seeking specific performance, regardless of whether other remedies are sought;
• the costs of the works are no more than £1,000; and
• the value of any other claim for damages is no more than £1,000.

Outcome of Hearing

The Court rejected the tenant’s contention that had the claim for the alleged disrepair been issued, it would have subsequently been allocated to the fast track and they were entitled to their reasonable costs to be assessed on the standard basis. The tenant argued that the case would have been allocated to the fast track on the basis of their own expert’s schedule of works and costings at the open market rate, which was more than £1,000.

The Court deemed that the tenant’s reasonable costs were dependent on the value of the claim for repairs. Further, the Court commented that as the landlord was a local authority and it was known to the tenant’s expert that the landlord would have a workforce of professionals to undertake the remedial works, the tenant’s expert’s basis of valuing works was flawed. The Court held that as the landlord would carry out the works within their own capacity, the value of the works from their own contractors was the appropriate value. Thereby, on the balance of probabilities, the claim would have been allocated to the small claims track. The Court ordered that the landlord pay the tenant’s fixed costs only.

Whilst this was undoubtedly a good result for Bury Council, it is important to note that as this decision was made in a County Court, it is not binding on other Courts.

What does this mean for landlords?

On receipt of a letter of claim the landlord should arrange for an expert inspect the property and prepare a proposed schedule of works as soon as possible. This schedule of works should be detailed and included the full costs of the works but also separate the works raised in the letter of claim from any additional works noted during the inspection. Subsequently, the landlord should carry out the works that their own expert has identified (at the bare minimum) even if negotiations with the tenant regarding the works are ongoing.

Importantly in this case, the Court took into account the fact that local authorities are likely to have their own in-house repair teams and are able to negotiate favourable rates with contractors. This means that the cost of completing works to are typically lower than open market rates. Landlords who have in-house repairs teams or favourable agreements with contractors can use this to their advantage when discussing the costs of works to argue that open market rates are not appropriate.

This case, whilst not binding, could have the effect of meaning that tenants are less inclined to accept settlement offers of £1,000 or less as by doing so their solicitors would not recover reasonable costs. We anticipate that following this decision, tenants will be seeking increased damages from their landlords and cases may take longer to settle.

Written by Elaine Bathers (Solicitor) and Semiha Ozbay (Paralegal)