Part 4 - Regulation of leasehold Section 62: Limits on rights of landlords to claim litigation costs from tenants
Section 62 amends the Landlord and Tenant Act 1985 (LTA 1985) by replacing the existing Section 20C with the new Section 20CA as set out in subsections (2) and (3); and amends Schedule 11 of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002) by replacing the existing paragraph 5A with the new paragraph 5B as set out in subsections (4) to (7).
	New Section 20CA subsection (1) means that a landlord’s litigation costs are not regarded as relevant costs when determining the amount of a variable service charge. This applies whether or not leaseholders are participating in the proceedings.
	New Section 20CA subsection (2) requires landlords to make an application to the relevant court or tribunal for an order that subsection (1) does not apply to any or all of their litigation costs in relation to a variable service charge payable by a person specified in the application. The landlord must specify in the application those persons who it is seeking to pay its litigation costs as a variable service charge. Litigation costs include any costs incurred, or to be incurred, by the landlord in proceedings to which the landlord and leaseholder are a party and that concern a lease of a dwelling. Subsection (10) sets out which proceedings "concern a lease" for the purpose of new Section 20CA.
	New Section 20CA subsection (3) provides that an order may only be made by the relevant court or tribunal under subsection (2) if the landlord’s litigation costs would have been able to be taken into account when determining the amount of a variable service charge if it weren’t for subsection (1). Subsection (3) also provides that an order may only be made by the relevant court or tribunal under subsection (2) on litigations costs that are not incurred (or to be incurred) by proceedings arising from leasehold enfranchisement as set out in Part 1 of the Leasehold Reform Act 1967, or Chapter 1 or 2 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993, or from right to manage as set out in Chapter 1 of Part 2 of the CLRA 2002.
	New Section 20CA subsection (4) provides for the relevant court or tribunal to make such order on the application made by a landlord under subsection (2) as it considers just and equitable in the circumstances.
	New Section 20CA subsection (5) provides that the appropriate authority may by regulation specify matters the relevant court or tribunal must take into account when deciding whether to make an order under subsection (2).
	New Section 20CA subsection (6) provides that the appropriate authority may make regulations to provide how an application by a landlord under subsection (2) is made; whether and how notice of application by a landlord is to be given to person(s) specified and not specified in the application; the effect of giving notice of an application and failing to give notice of an application under (6)(b); and circumstances where a person not specified in an application by a landlord is to be treated as having been specified in the application.
	New Section 20CA subsection (7) signposts new Section 20CB for powers of the appropriate authority to provide for exceptions to 20CA subsection (1).
	New Section 20CA subsection (8) provides that a lease, contract or other arrangement has no effect if it says differently to this Section, including regulations made under this Section or an order made under this Section.
	New Section 20CA subsection (9) defines terms used in Section 20CA.
	New Section 20CA subsection (9) provides through the definition of "the relevant court or tribunal" that in most cases the court or tribunal who is hearing the proceedings (which creates the litigation costs) should consider the Section 20CA application. It also sets out where an application should be made after the proceedings are concluded.
	New Section 20CA subsection (10) provides that references in new Section 20CA to proceedings concerning a lease includes proceedings concerning any matter arising out of a lease, a lease term, or agreement or arrangement in connection with the lease; proceedings concerning any enactment relevant to the lease, or agreement or arrangement in connection with the lease; or proceedings that otherwise have a connection with the lease.
	New Section 20CA subsection (11) provides that regulations in this Section under subsection (5) and (6) are to be made by statutory instrument; may make provision generally or only in relation to specific cases; may make different provision for different purposes or different areas; and may include supplementary, incidental, transitional or saving provision.
	New Section 20CB subsection (1) provides for the appropriate authority to make regulations to provide for circumstances where (a) Section 20CA(1) does not apply; or (b) the effect of Section 20CA(1) is suspended until an event of a specified description occurs.
	New Section 20CB subsection (2) makes clear the circumstances the regulations can provide for include (but are not limited to) that: (a) litigation costs, (b) relevant proceedings, or (c) the landlord, are of a specified description.
	New Section 20CB subsection (3) makes clear that where regulations are made under subsection (1)(b) and Section 20 CA( 1) is suspended until an event of a specified description occurs that: Section 20CA(1) does not have effect before the event; but Section 20CA(1) does have effect on or after the event in relation to a variable service charge paid or payable before the event.
	New Section 20CB subsection (4) makes clear that if a variable service charge in respect of litigation costs was paid before the event; and the landlord’s litigation costs were regarded as relevant costs until the event, the landlord may retain the amount of those costs after the event only if the relevant court or tribunal makes an order under Section 20CA(2) in relation to that charge.
	Together, new Section 20CB(1)(b), (3) and (4) provides certain landlords (specified in regulations) the ability to recover litigation costs through a variable service charge ahead of an application being made and determined under Section 20CA(2). However, those landlords are still required to apply to the relevant court or tribunal for their litigation costs once an "event" specified in regulations happens; and can only retain the costs after the "event" if the court or tribunal makes an order on the application under Section 20CA(2). An example of where it might be appropriate to allow the recovery of litigation costs in this way is if a building is resident-led.
	New Section 20CB subsection (5) defines terms used in Section 20CB.
	New Section 20CB subsection (6) provides that regulations in this Section are to be made by statutory instrument; may make provision generally or only in relation to specific cases; may make different provision for different purposes; and may include supplementary, incidental, transitional or saving provision. New Section 20CB subsection (7) provides that regulations made under this Section are subject to the affirmative procedure.
	Section 62 subsection (5) amends Section 172(1) of the CLRA 2002 (application of provision to the Crown) so that the new Section 5B applies to Crown land in Wales (as well as England).
	Section 62 subsection (6) amends Section 178(4) of the CLRA 2002 (orders and regulations) to insert ", paragraph 5C of Schedule 11" after "171". This makes regulations under the new paragraph 5C of Schedule 11 subject to the affirmative procedure.
	New paragraph 5B(1) means that a landlord’s litigation costs are not payable by a leaseholder as an administration charge.
	New paragraph 5B(2) requires landlords to make an application to the relevant court or tribunal for an order that sub-paragraph (1) does not apply to any or all of their litigation costs in relation to an administration charge. Litigation costs include any costs incurred, or to be incurred, by the landlord in proceedings to which the landlord and leaseholder are a party and that concern a lease of a dwelling. Sub-paragraph (9) sets out which proceedings "concern a lease" for the purpose of new paragraph 5B.
	New paragraph 5B(3) provides that an order may only be made by the relevant court or tribunal under sub-paragraph (2) if the landlord’s litigation costs would have been payable by a leaseholder as an administration charge if it weren’t for sub-paragraph (1). Sub-paragraph (3) also provides that an order may only be made by the relevant court or tribunal under sub-paragraph (2) on litigations costs that are not incurred (or to be incurred) by proceedings arising from leasehold enfranchisement as set out in Part 1 of the Leasehold Reform Act 1967, or Chapter 1 or 2 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993, or from right to manage as set out in Chapter 1 of Part 2 of the CLRA 2002.
	New paragraph 5B(4) provides for the relevant court or tribunal to make such order on the application made by a landlord under sub-paragraph (2) as it considers just and equitable in the circumstances.
	New paragraph 5B(5) provides that the "appropriate national authority" (which is defined by Section 179 of the CLRA 2002 as the Secretary of State in England or Welsh Ministers for Wales) may by regulation specify matters the relevant court or tribunal must take into account when deciding whether to make an order under sub-paragraph (2).
	New paragraph 5 B( 6) signposts new paragraph 5C for powers of the "appropriate national authority" to provide for exceptions to 5B sub-paragraph (1).
	New paragraph 5B(7) provides that a lease, contract or other arrangement has no effect if it says differently to this paragraph, including regulations made under this paragraph or an order made under this paragraph.
	New paragraph 5B(8) defines terms used in paragraph 5B.
	New paragraph 5B(8) provides through the definition of "the relevant court or tribunal" that in most cases the court or tribunal who is hearing the proceedings (which creates the litigation costs) should consider the paragraph 5B application. It also sets out where an application should be made after the proceedings are concluded.
	New paragraph 5B(9) provides that the reference in the definition of "relevant proceedings" (under sub-paragraph (8)) to proceedings concerning a lease includes proceedings concerning any matter arising out of a lease, a lease term, or agreement or arrangement in connection with the lease; proceedings concerning any enactment relevant to the lease, or agreement or arrangement in connection with the lease; or proceedings that otherwise have a connection with the lease.
	New paragraph 5C(1) provides for the "appropriate national authority" to make regulations to provide for circumstances where (a) paragraph 5B(1) does not apply; or (b) the effect of paragraph 5B(1) is suspended until an event of a specified description occurs.
	New paragraph 5C(2) makes clear the circumstances the regulations can provide for include (but are not limited to) that: (a) litigation costs, (b) relevant proceedings, or (c) the landlord, are of a specified description.
	New paragraph 5C(3) makes clear that where regulations are made under subsection (1)(b) and paragraph 5B(1) is suspended until an event of a specified description occurs that: paragraph 5B(1) does not have effect before the event; and paragraph 5B(1) does have effect on or after the event in relation to an administration charge paid or payable before the event.
	New paragraph 5C(4) makes clear that if an administration charge in respect of litigation costs was paid before the event, the landlord may retain the amount of that charge after the event only if the relevant court or tribunal makes an order under paragraph 5B(2) in relation to that charge.
	Together, new paragraph 5C(1)(b), (3) and (4) provides that certain landlords (specified in regulations) the ability to recover litigation costs ahead of an application being made and determined under paragraph 5 B( 2). However, those landlords are still required to apply to the relevant court or tribunal for their litigation costs once an "event" specified in regulations happens; and can only retain the costs after the "event" if the court or tribunal makes an order on the application under paragraph 5B(2). An example of where it might be appropriate to allow the recovery of litigation costs in this way is if a building is resident-led.
	New paragraph 5C(5) defines terms used in paragraph 5C.