Daejan - Who are the real winners?

One of the main stumbling blocks for tenants in pursuing a claim against the landlord is undoubtedly the costs involved in doing so. Of course, the LVT is intended to be a costs free environment and so there is no risk of becoming liable to pay the landlord’s costs (except in the event that penal costs are ordered, which are relatively nominal in any event). However, it also means that if the tenants want legal or other professional representation, they have to foot the bill themselves and there is no scope for recovering those costs from the landlord, even if their application is successful on all counts.

There will inevitably be occasions where the costs of going to the LVT would outweigh the sum in dispute and so it is simply not worth pursuing the application. Alternatively, tenants may be wary about spending that sort of money in circumstances where the LVT might grant dispensation notwithstanding that there has been a clear breach of the consultation requirements. Prior to the Supreme Court decision, the position was that if dispensation was granted, the entire sum claimed would be payable and the tenants would have to pay their own costs, which could leave them significantly out of pocket.

Now, the LVT can impose a condition on granting dispensation that the landlord pays the tenants’ reasonable costs incurred in connection with the landlord’s application for dispensation. This will involve the LVT summarily assessing the tenants’ costs at the end of the hearing.

It is thought that the LVT will be likely to order that the landlord pays the tenants’ costs so long as the challenge to the landlord’s application for dispensation has been reasonably brought. It could well be therefore that so long as the landlord has actually breached the consultation requirements, it should expect to have to pay the tenants’ costs in relation to the landlord’s application for dispensation, in addition to compensating the tenants for any prejudice that they can prove and even if the tenants are not successful in proving prejudice.

Although the LVT will still not, strictly speaking, be making a costs order, costs will be payable as a condition to dispensation and therefore the effect will be the same as if a costs order had been made. Presumably, if the landlord fails to pay the costs, the dispensation will fall away and therefore the tenants will be entitled to rely on the £250 cap.

How the LVT will deal with costs and what impact it will have on landlords and tenants are just a couple of many points of debate arising from the case and it will be interesting to see how applications for dispensation evolve in light of the decision.