Limehouse East Management Limited v Simon Butler & Ors

Introduction

1. This is the Tribunal’s decision in four appeals against decisions made by the First-tier Tribunal about costs and fees in a service charge dispute. The First-tier Tribunal granted three of the four parties permission to appeal, and the Tribunal gave permission to E14 Limited. The designation of Limehouse East Management Limited (“Limehouse”) as the appellant and the three leaseholders as respondents and cross-appellants has no significance and the parties could equally have been designated the other way round, since they are all challenging the same decision; I refer to them by name rather than by those designations. The appeal has been determined under the Tribunal’s written representations procedure; representations on behalf of Limehouse have been written by Mr Carl Brewin of counsel, and the leaseholders have been represented by Mr Simon Butler. The factual and legal background

2. Limehouse East Management Limited (“LEML”) is the management company under the leases of flats at Basin Approach, London E14. The leases all make provision for the payment of service charges; the flats are in several blocks, and there are both building charges and estate charges to be paid as one would expect.

3. The FTT has jurisdiction under section 27 A of the Landlord and Tenant Act 1985 to decide whether leasehold service charges are payable and if so in what amount. The First-tier Tribunal made a decision on 21 February 2025 about liability to pay service charges in respect of five flats at Basin Approach, one owned by Mr Butler, one by Limemanor Limited and three by E14 Limited; the leaseholders were the applicants in the FTT and Limehouse was the respondent. That decision related to a number of service charges, and the parties had mixed success. The FTT also made some consequential orders about costs and fees, to which the legal background is as follows.

4. Many leases allow a landlord of management company to recover its costs of legal proceedings from the tenants through the service or administration charge; that led to the paradoxical position that a tenant might successfully challenge a service charge and yet have to pay their landlord’s legal costs.

5. In order to avoid that situation where it gave rise to injustice, two provisions were enacted. The first is section 20 C of the 1985 Act , which reads: “(1) A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before … the First-tier Tribunal, or the Upper Tribunal, … are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application. … (3) The … tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.”

6. The second is paragraph 5A of Schedule 11 to the 2002 Act, which reads: “(1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant's liability to pay a particular administration charge in respect of litigation costs. (2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable.”

7. Both provisions give the FTT a discretion whether or not to make the order sought by the tenant. The range of what is “just and equitable” is broad, and an appeal against an order or the refusal to make an order under either provision will fail unless the FTT made an error of law or made a decision which no reasonable tribunal could have made. Moreover, orders under these provisions are not costs orders; they are orders that disturb the landlord’s contractual right under the lease. They do not simply “follow the event”, but they can be made, in the FTT’s discretion, if to allow the landlord to recover its costs would give rise to injustice.

8. Orders under section 20 C and paragraph 5A are not about the amount of costs claimed; where the landlord seeks to charge its costs as part of a service charge, they are payable only if reasonably incurred, pursuant to section 19 of the Landlord and Tenant Act 1985 . Scrutiny of the level of costs can therefore be carried out if such service charges are demanded in due course, but that scrutiny does not take place in the context of applications under section 20 C and paragraph 5A which are about the question whether in principle the landlord should be allowed to exercise its right to charge the costs to the leaseholders.

9. Mr Butler for the leaseholders has helpfully referred the Tribunal to Conway v Jam Factory Freehold Ltd [2013] UKUT 0592 (LC) where the Tribunal (the Deputy President, Martin Rodger QC) at paragraph 53 quoted the words of the Lands Tribunal (HHJ Rich QC) in Tenants of Langford Court (Sherbani) v Doren Limited LRX/37/2000: “…31. In my judgment the primary consideration that the [FTT] should keep in mind is that the power to make an order under s.20 C should be 3 used only in order to ensure that the right to claim costs as part of the service charge is not used in circumstances that make its use unjust. Excessive costs unreasonably incurred will not, in any event, be recoverable by reason of s.19 of the Landlord and Tenant Act 1985 . Section 20 C may provide a short route by which a tribunal which has heard the litigation giving rise to the costs can avoid arguments under s.19 , but its purpose is to give an opportunity to ensure fair treatment as between landlord and tenant, in circumstances where even although costs have been reasonably and properly incurred by the landlord, it would be unjust that the tenants or some particular tenant should have to pay them.”

10. At paragraph 57 the Deputy President said pointed out if the landlord was a resident-owned management company with no resources apart from service charge income that would be a relevant factor in the FTT’s decision.

11. Rule 10(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 provides: “(2) The Tribunal may make an order requiring a party to reimburse to any other party the whole or part of the amount of any fee paid by the other party which has not been remitted by the Lord Chancellor.”

12. The FTT will often make such an order in favour of the successful party in a service charges dispute. Again, the making of such an order is in the FTT’s discretion; there are no rules as to when such an order should be made, and an appeal against the making or refusal of an order will fail unless the FTT made an error of law or made a decision which no reasonable tribunal could have made. The FTT’s decision

13. At paragraphs 107 to 110 of its decision the FTT said this: “107. At the end of the hearing, the Applicant made an application for a refund of the fees that he had paid in respect of the application/ hearing. In the application form the applicants applied for an order under section 20 C of the 1985 Landlord and Tenant Act and/or para 5A of Sch 11 of the Commonhold and Leasehold Reform act 2002 in addition to the reimbursement of the application fee and hearing costs.

108. The applicants submitted that where an applicant has been partially successful, it is usual for the Tribunal to make an order that no part of the landlords’ costs in connection with the proceedings are to be regarded as relevant costs in determining the amount of any service charge, and the applicant’s liability to pay administration charges in respect of litigation costs are extinguished 109. The respondent objected to these applications and asserted that the leases provide for the recovery of legal costs; in any event the application was premature as much of it was based on estimated service charges rather than the actual sums incurred, the applicants had failed to attempt any negotiations with the respondent before issuing the applications to the tribunal.

110. Having heard the submissions from the parties and taking into account the determinations above and the limited success of the applicants, the tribunal determines that it is just and equitable in the circumstances an order to be made under section 20 C of the 1985 Act and/or para 5A of the 2002 Act so that the respondent may not pass more than 75% of any of its costs incurred in connection with the proceedings before the tribunal through the service charge.

111. The tribunal makes no order in respect of the reimbursement of fees.” The appeals: procedural background

14. LEML appeals the orders made under section 20 C and paragraph 5A; it argues that no order should have been made. The three leaseholders all appeal on the ground that an order should have been made under each provision in respect of the 100% of the landlord’s costs, and they appeal the refusal to order reimbursement of fees.

15. Permission to appeal was granted to LEML, to Limemanor Limited and to Mr Butler by the FTT. The Upper Tribunal granted to LEML and to E14 permission to appeal aspects of the substantive parts of the FTT’s decision, and also gave E14 permission to appeal the section 20 C and paragraph 5A orders. All four appeals in respect of the section 20 C and paragraph 5A orders were stayed pending the determination of the substantive appeals.

16. The substantive appeal by LEML was later withdrawn, leaving only E14’s appeal, which was determined by the Tribunal on 22 December 2025 after a hearing: E14 Limited v Limehouse East Management Limited [2025] UKUT 426 (LC) .

17. E14 Limited’s substantive appeal was on three grounds. However, it was agreed that ground 2 did not require determination and ground 3 failed. Ground 1 related only to E14 Limited’s own units and had no effect upon the liability of Limemanor Limited and of Mr Butler to pay service charges, and therefore so far as they are concerned the decision of the FTT stands unamended.

18. So far as E14 Limited’s ground 1 is concerned, this Tribunal set aside the FTT’s decision about the extent of the service charge payable. This ground was a point of construction of the lease, and the Tribunal found that both the construction adopted by the FTT (and advocated by LEML) and the construction argued by E14 Limited were implausible. It substituted its own decision, and the practical effect of that was that E14 Limited has to pay service charges in respect of the ground floor of the building, rather than the very limited area occupied by its own registered titles. That was the area in respect of which LEML was in any event seeking to charge it, despite that not being what LEML said that the lease meant. The practical result of the appeal is that, despite having succeeded in having the FTT’s decision set aside, what E14 Limited is asked to pay by way of service charge will not change. The appeals from the section 20 C and paragraph 5A orders The arguments in the appeal

19. LEML’s grounds of appeal were, first, that the FTT had not invited submissions on the section 20 C/paragraph 5A orders at the hearing (although the parties had made written representations about these orders beforehand.

20. Second, LEML says that the FTT failed to refer to authority, and failed to take proper account of LEML’s written submissions which made it clear that many items in dispute had been conceded or agreed, that LEML was a leaseholder-owned company and that any order made would have consequences for all the leaseholders, and that an order would be an interference with its contractual rights under the leases.

21. The leaseholders, on the other hand, argue that being relieved of 25% of the landlord’s costs is not enough. They put forward a number of grounds.

22. First, they say that they should have been told the amount of fees incurred so that they could make representations on proportionality.

23. Second, they say that they were 82% successful in terms of the amounts they were going to have to pay, and therefore having to pay 75% of the landlord’s costs is too much. LEML disputes that calculation and says that once one takes into account items that were in the end conceded or not pursued the leaseholders’ success was far lower.

24. The leaseholders also argue that the FTT did not give proper reasons for its judgment that they had achieved “limited success.” They dispute that assessment, in any event, and say that they were substantially successful. Furthermore, E14 Limited in the appeal determined in December 2025 was successful in overturning the decision about the extent of its liability and the construction of the lease. Discussion and conclusion

25. I do not accept either party’s argument that the FTT should have given an opportunity for further submissions at the hearing; it had the parties’ written submissions, and it is unlikely that they would have been able to add much to them without knowing the FTT’s substantive decision. It might have been useful for the FTT to invite further submissions after its substantive decision was made, but it would not be proportionate to allow the appeal on the basis that that was not done, in light of the fact that the FTT made a decision that was well within the broad range of its discretion. Its order relieved the three individual leaseholders of liability for 25% of the landlord’s fees, in recognition of their partial success in the proceedings, and in the knowledge that LEML is a leaseholder-owned management company. I do not think that the FTT ignored that latter point; it is reflected in the fact that the order made was a limited one.

26. The leaseholders’ argument that the order was wrong because they were 82% successful is without merit whether or not the figure of 82% was correct and on whatever basis it wa calculated – although I struggle to see how a decision about the construction of the lease (which was the issue in E14 Limited’s appeal) can be expressed in percentage terms. The FTT’s order did not have to match the amount of service charges of which the leaseholders were relieved, whether that is counted in pounds or in issues. That would be a mechanical and pedantic approach. The FTT in making its order was entitled to look at the matter in the round, and to consider for example the time and energy spent on individual issues.

27. There is no substance at all in the idea that the FTT should have sought information about the amount of LEML’s costs and given the leaseholders the opportunity to make representations about them. Decisions about section 20 C/Paragraph 5A orders are invariably made without knowledge of the level of costs; the level of costs can be challenged later if necessary (see paragraph 8 above).

28. It simply cannot be said that the FTT’s order was irrational or made in consequence of an error or law. It pleased neither side, but it was one of the decisions open to the FTT in the exercise of its discretion and all parties’ appeals fail. The leaseholders’ appeal from the refusal to reimburse their fees in the FTT

29. Finally, the leaseholders appeal the FTT’s refusal to reimburse the fees they had paid in the FTT. The FTT did not give reasons for its refusal to make an order, but it will have had in mind the parties’ partial success and the orders it had already made under section 20 C and paragraph 5A. Whilst there is of course a duty on the FTT to give reasons, it would be disproportionate to allow the appeal on this point purely for the absence of reasons because the FTT’s thinking is easy to infer; it had given the leaseholders the benefit of relief from most of the landlord’s legal costs, but was not minded to go further an order reimbursement of fees.

30. There is no entitlement, even for a party that has been entirely successful, for reimbursement of fees. An appeal will not be successful unless the refusal involved an error of law or some other irrationality. This decision did not. There is no basis on which it can be set aside. Conclusion

31. The appeals all fail and the FTT’s orders as to costs and fees stand. Judge Elizabeth Cooke 17 March 2026 Right of appeal Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision. The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties). An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking. If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.