4.3 Section 60 Costs and Fees Recovery
The Statutory Basis of Section 60 Costs
Section 60 of the Leasehold Reform, Housing and Urban Development Act 1993 establishes the tenant's liability for the landlord's reasonable costs following the service of a notice under section 42 for a lease extension. Specifically, subsection (1) outlines that the tenant shall be liable for costs incurred by any relevant person-defined in subsection (6) as the landlord, any other landlord under section 40(4), or any third party to the lease-in connection with:
(a) any investigation reasonably undertaken of the tenant’s right to a new lease;
(b) any valuation of the tenant’s flat obtained for the purpose of fixing the premium or any other amount payable by virtue of Schedule 13;
(c) the grant of a new lease under section 56.
Subsection (2) qualifies that costs for professional services are reasonable only to the extent they might be expected if the landlord were personally liable for them. Subsection (3) limits liability to costs incurred up to the point where the notice ceases to have effect or is withdrawn, except under subsections (4) and (5), which exclude liability in cases of deemed withdrawal due to non-payment of deposit or tribunal proceedings costs.
This framework ensures a balance, compelling tenants to reimburse legitimate expenses while safeguarding against excessive demands. Advisors should note that these costs accrue from the moment the initial notice is served, underscoring the importance of early scrutiny in client consultations.
Categories of Recoverable Costs
Landlords may claim a broad spectrum of expenses under section 60, provided they are reasonable and directly incidental to the specified matters. Common categories include:
- Legal Fees: Covering advice on the validity of the tenant's claim, drafting counter-notices under section 45, negotiating terms, and completing the new lease. These must be substantiated with detailed breakdowns, as tribunals frequently dissect hourly rates and time spent.
- Valuation Fees: For professional surveys to determine the premium, often involving chartered surveyors. While agreed valuations are straightforward, disputes can lead to tribunal intervention.
- Incidental Costs: Such as administrative expenses or investigations into title, but only if they align with the statutory purposes. Subsection (1) excludes litigation costs in tribunal proceedings, shifting the focus to pre-completion activities.
In practice, surveyors advising landlords should prepare comprehensive cost schedules early, anticipating challenges. For leaseholder representatives, identifying non-incidental items such as unrelated correspondence can form the basis of effective reductions.
Assessing Reasonableness: Principles from Case Law
The cornerstone of section 60 is the requirement for reasonableness, assessed as if the landlord bore the costs personally. Tribunals apply a summary assessment, drawing on guideline hourly rates from the Senior Courts Costs Office, adjusted for location and complexity.
Key principles emerge from precedents:
- In Drax v Lawn Court Freehold Ltd [2010] UKUT 81 (LC), the Upper Tribunal emphasised that costs must be proportionate, though with a lighter touch than in civil litigation, focusing on whether they were reasonably incurred for the statutory tasks.
- The Trustees of John Lyons Charity v Terrace Freehold LLP [2018] UKUT 0247 (LC) reinforced proportionality, noting that modest premiums do not justify extravagant legal involvement.
Practitioners should advise clients to negotiate fixed fees or volume discounts where multiple claims arise in a block, as failure to do so can undermine reasonableness claims.
Notable Cases on Landlords Claiming Section 60 Costs
Several decisions illustrate how landlords successfully or partially recover costs, providing actionable precedents.
In Sinclair Gardens Investments (Kensington) Ltd v Wisbey [2016] UKUT 203 (LC), the landlord claimed £1,725 plus VAT for legal fees in a straightforward lease extension with a £10,981 premium. The First-tier Tribunal reduced this to £845 plus VAT, excluding costs for drafting the counter-notice as non-recoverable. On appeal, the Upper Tribunal held that such costs were incidental to investigating the claim and valuing the property, allowing recovery but reducing to £1,320 plus VAT due to the landlord's failure to negotiate a fixed fee amid multiple similar claims in the development. This case underscores the duty to minimise expenses through bulk negotiations.
Another example is Citysharks Residential Ltd v Liddell & Wilkins (Rochester House), decided in 2025 by the First-tier Tribunal. The landlord, acting as receivers, claimed £17,948 plus VAT in legal fees for a complex extension involving insolvency issues and a £32,500 premium. The tribunal allowed £10,060 plus VAT, affirming base hourly rates (£540 for partners) but slashing hours from 36.3 to 22, citing overclaiming on valuation matters and duplications. Advisors can leverage this for cases with specialist elements, ensuring detailed justifications.
Cases Where Excessive Costs Were Reined In
Tribunals frequently intervene when costs appear disproportionate, offering lessons in challenge strategies.
In the 2013 case of 50A Eric Road, Chadwell Heath (LON/00AB/OLR/2013/119), the landlord's legal fees of £1,800 plus VAT and surveyors' fees of £735 plus VAT were reduced to £801 plus VAT and £464 plus VAT respectively. The tribunal ruled that central London rates were unreasonable for an Essex property, establishing that while landlords may choose professionals freely, tenants need not fund premium locations unnecessarily.
Similarly, in 111 and 113 Cheston Avenue, Croydon (LON/00AH/0C9/2012/0006), the tribunal held that if the full cost of the landlord's chosen solicitor is unreasonable, the landlord must bear the excess, reinforcing local fee benchmarks.
A 2024 decision in Manor Park Properties Ltd v Eastway Properties Ltd (1a Claire Court) saw claimed costs of £7,081 plus VAT for a second notice reduced to £1,505 plus VAT. The tribunal disallowed inquiries into the tenant's solicitors' authority as unnecessary, limiting work to five hours by a single senior associate at £301 per hour, highlighting the need for streamlined processes in uncomplicated claims.
In a Brighton case reported in 2025, a landlord's legal fees for a lease extension were slashed from £11,702 to £2,411 by the First-tier Tribunal, due to excessive billing in a standard transaction. This exemplifies the value of presenting comparative evidence to tribunals.
These reductions often stem from failures to align with guideline rates, over-reliance on senior fee earners, or unsubstantiated time entries. Surveyors and lawyers should compile local fee data and tribunal precedents when advising on disputes.
Optimising Cost Recovery: Strategic Advice for Landlords
To maximise recoverable section 60 costs while ensuring they withstand scrutiny, landlords and their advisors should adopt proactive measures grounded in statutory provisions and practical efficiencies.
Under section 44 of the Leasehold Reform, Housing and Urban Development Act 1993, following the service of a counter-notice, landlords are entitled to require a deposit from the tenant equivalent to 10 per cent of the premium proposed in the initial notice or £250, whichever is greater. Demanding this deposit promptly secures funds on account, which can be applied towards accruing costs, mitigating cash flow risks in protracted negotiations. Advisors should counsel landlords to issue such demands without delay, particularly in high-value claims where costs may escalate.
In valuation exercises, landlords should prioritise desktop assessments over full access inspections where feasible, without compromising accuracy. Schedule 13 to the Act disregards tenant improvements in premium calculations, rendering internal inspections superfluous in many instances. For example, if the flat's dimensions are known from plans or prior surveys, or if identical units in the block have been accessed previously, a desktop valuation suffices and reduces costs. Tribunals have viewed unnecessary inspections as unreasonable; if the primary motive is a general property check unrelated to the statutory valuation, such expenses fall outside recoverable section 60 costs, as they fail the incidental test in subsection (1).
Where multiple lease extension applications coincide in the same building, economies of scale present opportunities for cost reductions. Bulk instructions to solicitors or valuers can justify discounted rates or fixed fees, as tribunals expect landlords to leverage such synergies. The Sinclair Gardens decision illustrates this, where the failure to negotiate volume terms led to reductions, emphasising that reasonableness encompasses efficient resource allocation across concurrent claims.
By integrating these strategies, landlords can fortify their cost claims against challenges, while leaseholder advisors might counter by highlighting any deviations from these prudent approaches in tribunal submissions.
Optimising Cost Challenges: Strategic Advice for Tenants
Tenants and their advisors can employ targeted strategies to contest and minimise section 60 cost liabilities, drawing on statutory safeguards and tribunal precedents to ensure only reasonable expenses are borne.
Early intervention is critical; upon receiving a cost schedule, tenants should scrutinise it for proportionality, requesting detailed breakdowns and evidence of incurred expenses. Where discrepancies arise, applying to the First-tier Tribunal under section 91(2)(d) for a determination using Form Leasehold 10 can preempt escalation, potentially capping costs before completion. This approach is particularly effective in straightforward claims, where tribunals often favour streamlined assessments.
In valuation disputes, tenants might advocate for joint desktop valuations to avoid duplicated fees, especially in uniform blocks where prior data exists, leveraging Schedule 13's disregard for improvements to argue against unnecessary access. If landlords insist on full inspections without justification, such costs can be challenged as non-incidental, shifting the burden to the landlord.
For bulk applications in multi-unit properties, tenants benefit from coordination; pooling resources to engage shared experts or negotiate collective settlements can highlight economies of scale that landlords overlooked, as in Sinclair Gardens, thereby strengthening arguments for reductions. Advisors should gather comparative fee data from local professionals and recent tribunal decisions to substantiate challenges, presenting evidence of guideline rates to undermine inflated claims.
These tactics empower tenants to navigate disputes assertively, preserving funds while facilitating timely extensions.
Disputing Section 60 Costs: Implications for Completion
In scenarios where a landlord's claimed section 60 costs are deemed excessively high by the tenant, potentially stalling the completion of a lease extension, the statutory framework provides mechanisms to resolve such impasses without indefinitely preventing the grant of the new lease. Property professionals must advise clients on these nuances to avoid unnecessary delays or forfeitures of rights, recognising that while costs are recoverable, their quantum and timing of payment can be contested through tribunal intervention.
The Impact of High Costs on the Completion Process
Under section 56(1) of the Leasehold Reform, Housing and Urban Development Act 1993, the landlord is obligated to grant a new lease upon payment of the premium determined under Schedule 13, but completion hinges on the tenant tendering not only the premium but also any ascertained costs, including those under section 60. If the landlord presents inflated cost demands that the tenant cannot or will not accept outright, this does not automatically halt proceedings. Instead, section 56(3) stipulates that the tenant must tender the premium, known rents, and section 60 costs "so far as ascertained," with reasonable security offered for any unascertained amounts. This provision prevents landlords from leveraging disputes to block completion, as tribunals have consistently upheld that security such as an undertaking to pay the determined sum suffices for disputed elements.
In practice, where costs exceed what the tenant views as reasonable, advisors should recommend tendering the undisputed portion alongside a formal reservation of rights to challenge the balance. This approach facilitates completion while preserving the ability to seek tribunal determination post-grant, as evidenced in tribunal decisions where partial payments preceded adjudication.
Tenant’s Ability to Force Completion with Post-Determination of Costs
Tenants retain the capacity to compel completion even amid cost disputes, provided they comply with the tender requirements in section 56(3). The First-tier Tribunal (Property Chamber) holds jurisdiction under section 91(2)(d) to determine the amount and liability for section 60 costs in default of agreement, applicable both pre- and post-completion. This allows tenants to apply for a determination before finalising the extension, but to expedite matters, completion can proceed with costs resolved afterwards.
For instance, in the 2024 First-tier Tribunal case involving Shalom Full Circle Limited v The Incorporated Trustees of the Dulwich Estate (regarding 24 Beechwoods Court), the tenant completed the new lease on 21 March 2023 after paying only part of the disputed section 60 costs, subsequently applying to the tribunal on 6 April 2023 for a determination that reduced the claimed amount from £4,135.50 plus VAT to £2,467 including VAT. The tribunal's assessment focused on reasonableness, slashing hours for correspondence from 12.3 to 6, illustrating that post-completion challenges are viable and effective without derailing the extension process.
Advisors representing tenants should draft tenders incorporating undertakings for disputed sums, potentially averting landlord refusals. If the landlord nonetheless declines to complete, the tenant may apply to the county court under section 48(3) for an order vesting the new lease, though this is rare given the security option.
Landlord’s Right to Refuse Completion Pending Full Payment
Landlords cannot unilaterally refuse completion solely because their full cost claim remains unpaid, provided the tenant has tendered ascertained amounts and security for the disputed portion as per section 56(3). Insisting on upfront agreement to all costs before proceeding risks tribunal scrutiny, as costs are separate from the "terms of acquisition" under section 48(7) and do not form part of the lease grant itself. Practical guidance from sources like the Leasehold Advisory Service emphasises that while costs accrue from notice service, disputes do not preclude completion if addressed via security or partial payment.
However, if the tenant fails to offer adequate security such as a solicitor's undertaking or deposit the landlord may legitimately withhold execution until resolved. In such cases, landlords' advisors should document demands clearly, but aggressive stances may invite tribunal costs orders against them under rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, as seen in the Dulwich Estate case where a wasted costs application was dismissed.
Tenants' Recovery of Costs in Section 60 Disputes
In the event that a landlord's section 60 cost claim is substantially reduced by the tribunal, tenants may seek to recover their own expenses incurred in challenging the demand, though such recoveries are exceptional and subject to stringent criteria. The default position in First-tier Tribunal proceedings, as governed by the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, is that each party bears its own costs, promoting accessibility and discouraging protracted litigation over minor sums.
However, Rule 13(1)(b) of those Rules empowers the tribunal to order costs against a party who has acted unreasonably in bringing, defending, or conducting proceedings, including leasehold cases. This provision applies to disputes over section 60 costs, where a landlord's inflated or unsubstantiated claim might cross the threshold of unreasonableness. The test for such conduct, articulated in Willow Court Management Company (1985) Ltd v Alexander [2016] UKUT 290 (LC), involves a three-stage inquiry: first, objectively assessing if the behaviour was unreasonable (no reasonable person would act thus); second, exercising discretion to award costs; and third, determining the quantum, potentially on a standard or indemnity basis.
The bar for unreasonableness is high, requiring more than mere error or overclaiming; it demands evidence of misconduct, such as deliberate exaggeration, failure to provide breakdowns, or refusal to negotiate in good faith. Tribunals apply this sparingly to avoid chilling legitimate claims, but successful applications can cover legal fees, application fees (via reimbursement under Rule 13(2)), and even interest on assessed sums.
Illustrative precedents include scenarios where landlords' aggressive pursuits led to awards:
- In Shalom Full Circle Limited v The Incorporated Trustees of the Dulwich Estate (2024, First-tier Tribunal), while the tenant's wasted costs application was dismissed, the decision highlighted that egregious overclaiming, such as billing excessive hours without justification, could warrant scrutiny under Rule 13, though the landlord's conduct fell short in that instance.
- Zaid Alothman Holdings Limited v Better Intelligent Management Limited [2024] UKUT 289 (LC) affirmed costs orders against parties issuing proceedings without jurisdiction or pre-action engagement, principles adaptable to section 60 disputes where landlords demand payment without evidential support.
- In a 2021 case reported in Leibel v Baird, the Upper Tribunal upheld indemnity costs for misleading conduct, underscoring that obfuscation in cost schedules can trigger full recovery for the aggrieved party.