Freehold Managers (Nominees) Ltd v Surriya Begum (2015)

No costs clause

Do fixed costs under CPR 55 apply on forfeiture of a lease?

The background

JB Leitch was instructed to act in this, at the outset relatively straightforward, forfeiture case by our head leaseholder client, the Appellant in this appeal.

The long lease of the residential property in Oldham, Greater Manchester, was dated 19 May 1920. The Appellant sought to forfeit the lease and gain possession as a result of non-payment of sums due amounting to £49.97.

Whilst this sum is not substantial and the property in question is residential and therefore attracts rights in favour of the Respondent, the case judgment makes reference to the fact that statute allows for mitigation and, for proceedings to be issued, the arrears must have been outstanding for some considerable time.

The appeal related to the costs of the case, throughout which the Respondent did not engage. The lease contained no costs provision in favour of either party.

The law

At first instance, fixed costs were awarded to the Appellant, citing CPR 55:

‘Fixed costs apply to certain types of possession claims unless the Court orders otherwise. CPR 45.1 provides that fixed costs apply where:-

• the defendant gives up possession and pays the amount claimed (if any) and the fixed commencement costs;
• one of the grounds for possession is arrears of rent, the Court gave a fixed date for hearing, a possession order is made (whether suspended or not) and the Defendant has either failed to deliver a Defence or the Defence is limited to specifying proposals for payment of arrears; and
• the claim is brought under the accelerated procedure (pt 55 section 2) against an assured shorthold tenant, a possession order is made and the defendant has neither delivered a defence nor otherwise denied liability.”

The Appellant was given permission to appeal following the judge’s decision at first instance. On appeal, it was argued that, although the right to forfeit had arisen due to arrears of rent, the Claim Form issued had indicated that an order for possession was sought on the grounds of ‘forfeiture of the lease’ rather than purely ‘rent arrears’.

This distinction meant that the Appellant was not limited to an award of fixed costs.

The decision

On appeal, it was recognised that the claim for possession had been sought on the grounds of forfeiture of the lease, rather than as a result of rent arrears. The lease was deemed to have been forfeited effectively on service of the proceedings and the appeal was granted.

JB Leitch’s Stuart Miles comments on the decision:

“This judgment will be useful for landlords seeking to forfeit old leases containing poor costs clauses, particularly where confronted by a sympathetic first instance Judge.

Forfeiture proceedings are complex in nature. Ideally, landlords should instruct a solicitor to conduct the proceedings and this decision indicates positively that landlords should be able to recover their costs incurred in doing so.

The decision also contains a helpful comment to the effect that, though forfeiture proceedings can be brought for relatively modest arrears of ground rent, the Court should try to avoid focusing on this aspect and note that the claim itself is for possession of a property. Therefore, arguments about the claim not being proportionate should not hinder a landlord in bringing forfeiture proceedings.”