City and Country Properties Limited v BC Court RTM Company Limited

What effect did the repeal of sections 88 and 89 of the Commonhold and Leasehold Reform Act 2002 from 3 March 2025 have on the accrued liability of an RTM company and its members to pay the costs of a landlord following the withdrawal, six months earlier, of the RTM company’s notice claiming the right to manage?

By a decision published on 25 September 2025 the First-tier Tribunal, Property Chamber (the FTT) decided that the repeal of sections 88 and 89, which provided for the payment of a landlord’s costs by an RTM company which withdrew a claim notice, and their replacement with sections 87A and 87B, which provide that such costs are payable only if the RTM company has acted unreasonably, meant that no order for the payment of a landlord’s costs could be made after 3 March 2025 without a finding that the RTM company had behaved unreasonably; that was said to be so whether or not the costs had been incurred and the claim had been withdrawn before the new provisions came into force.

The main issue in this appeal is whether the FTT was correct in that conclusion. The FTT gave permission to appeal on that issue.

Permission to appeal was refused by the FTT on a second issue, for which the landlord now seeks the permission of this Tribunal. The FTT determined that if it was wrong on its interpretation of the statutory provisions, so that the landlord was entitled in principle to recover its costs, those costs should not include any sum in respect of VAT or fees paid to the Land Registry to procure up to date information about the premises. The additional issue is whether the FTT acted fairly when it determined that those sums were not payable, in circumstances where no question had been raised by the RTM company about its liability to pay them, and where the FTT had not given the landlord an opportunity to address the issues it had identified for itself.

At the hearing of the appeal the landlord, City and Country Properties Ltd (C&CP), was represented by Mr Simon Serota of Wallace LLP. The RTM company did not participate in the appeal; it was originally known as Bishopric Court (Horsham) RTM Company Ltd but changed its name to BC Court RTM Co Ltd after it had withdrawn its claim notice. I will refer to it as the RTM Company.

Part 2 of the Commonhold and Leasehold Reform Act 2002 (the 2002 Act) makes provision for the acquisition of the right to manage certain premises by a company known as an RTM company.

Before 3 March 2025, an RTM company and its members were liable for the reasonable non-litigation costs incurred by a landlord in consequence of an RTM claim up to the point of withdrawal (or deemed withdrawal) of the claim notice. Section 88 of the 2002 Act made the following provisions to that effect:

Section 89 of the 2002 Act made provision for costs where a claim ceases. By section 89(1)-(2), where a claim notice was withdrawn at any time the liability of the RTM company was a liability for costs incurred down to that time. By section 89(3) each person who was or had been a member of the RTM company was also liable for those costs, jointly and severally with the RTM company and other members.

The 2002 Act was subsequently amended by section 50 of the Leasehold and Freehold Reform Act 2024 (the 2024 Act). By section 50(3), new sections 87A and 87B were inserted into the Act and by section 50(4), sections 88 and 89 were omitted. The effect of the change is that an RTM company is now liable for costs following the withdrawal of a claim notice only if it has acted unreasonably.

The Secretary of State was given power by section 124(4) of the 2024 Act to introduce transitional or saving provisions by regulations, but section 50 came into force on 3 March 2025 without any such regulations having been made, by virtue of the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 (the 2025 Regulations).

Bishopric Court in Horsham (the Property) is a building comprising 55 flats to which Part 2 of the 2002 Act applies.

C&CP owns the freehold interest in the Property. There are also two head leasehold interests, owned by Fencott Ltd and Brickfield Properties Ltd. Each individual flat is occupied under its own long sublease.

On 1 August 2024, the RTM Company gave a claim notice to C&CP informing it that that it intended to acquire the right to manage the Property on 15 November 2024.

The claim notice was transmitted by C&CP to its solicitors, Wallace LLP, who responded on its behalf on 15 August 2024. The response included a request for relevant information including whether claim notices had also been served on Fencott Ltd and Brickfield Properties Ltd, the two head leaseholders of the Property.

On 28 August 2024, the RTM Company’s representative, Mr Cobrin of LP Property Block Management Ltd, acknowledged to Wallace LLP that he had omitted to serve claim notices on the other landlords and said that he would reissue the original claim notice. In response, Wallace LLP asked Mr Cobrin if he would formally confirm that the claim notice served on 1 August 2024 was now withdrawn. That request went unanswered and was repeated on 3 and 5 September.

By an email dated 5 September 2024 Mr Cobrin confirmed that the application to acquire the right to manage the Property was withdrawn.

On 16 September 2024, Wallace LLP confirmed that the costs incurred by C&CP in relation to the claim notice were £3,247.20 (comprising legal fees of £1,950 plus VAT and Land Registry fees of £756 plus VAT). The parties failed to reach agreement on the sum payable by the RTM Company and on 15 January 2025 C&CP applied to the FTT under section 88(4) of the 2002 Act for a determination of that sum.

By its decision of 25 September 2025 the FTT decided that the RTM Company was not liable to pay any of C&CP’s costs because its liability fell to be determined under new section 87B of the 2002 Act and not under sections 88 and 89, and because the condition in section 87B(2)(b) (that the RTM Company acted unreasonably in giving the notice or in not withdrawing it sooner) was not satisfied. I will come to its reasons for that conclusion shortly.

The FTT also decided that if, contrary to its primary conclusion, the RTM Company’s liability ought to be determined under sections 88 and 89 of the 2002 Act, C&CP had not satisfied it that VAT was recoverable on those costs and that the sum of £1000 which it considered would be payable should not be increased by VAT. Finally, the FTT determined that, if C&CP had not expected the RTM Company to pay its costs, it would not have incurred the cost of obtaining up to date copies of the title to each of the flats from the Land Registry and would have relied instead on its existing knowledge of the Property. The Land Registry fees of £756 plus VAT would also therefore have been disallowed.

On behalf of C&CP Mr Serota relied on the principle of public policy that changes to the law should not take effect retrospectively, which has effect both at common law and by statute to create a presumption that, unless a contrary intention appears, an enactment is not intended to have retrospective operation.

The relevant legal principles are not in doubt.

Section 16 of the Interpretation Act 1978 is part of a group of three sections concerned with repealing enactments. Section 16(1) provide as follows:

Section 16 gives statutory effect to a common law principle. A recent statement of that principle can be found in the judgment of Lord Lloyd-Jones in Lipton v BA Cityflyer Ltd [2024] UKSC 24, at [196]:

“My starting point is the general principle of the common law that conduct and events are normally governed by the law in force at the time at which they took place. As a result, subsequent legislative changes in the law are not generally given retrospective effect. Evidence of a clear contrary intention would be required before they could be given retrospective effect, for example by disturbing accrued rights. There is a general presumption at common law that legislation is not retrospective in the sense that it alters the legal consequences of things that happened before it came into force (Chitty on Contracts, 35th ed (2023), para 1-031A; Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), paras 7.13, 7.14). This general rule reflects public expectations and notions of fairness and legal certainty.”

The common law principle has also recently been reviewed and discussed at length by the Court of Appeal in Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point [2025] EWCA Civ 856 at [53]-[59] (Newey LJ) and at [135]-[139] (Nugee LJ). It is not necessary for me to repeat that review, other than to quote a passage to which both Lords Justices referred, from the judgment of Staughton LJ in Secretary of State for Social Security v Tunnicliffe [1991] 2 All ER 712, at 724:

Additionally, as Nugee LJ highlighted in Adriatic at [138], quoting Lord Reed in Sunshine Porcelain Potteries Pty Ltd v Nash [1961] AC 927, at 938, the presumption "may be overcome not only by express words in the Act but also by circumstances sufficiently strong to displace it".

All of the events with which this appeal is concerned took place before the change in the law on 3 March 2025. Under the law as it stood when the RTM Company gave its claim notice, and when it withdrew it, the liability of the RTM Company and its members to contribute to C&CP costs was governed by sections 88 and 89. C&CP’s application was made at a time when it had an accrued right to recover the costs it had incurred before the withdrawal so long as they met the requirements of section 88(1) and (2).

When reading section 50 of the 2024 Act in the light of the common law principle and its statutory manifestation in section 16 of the 1978 Act, the starting point is that the change which Parliament introduced is unlikely to have been intended to take away C&CP’s accrued right or relieve the RTM Company and its members of their existing liability. If Parliament did intend to affect those rights and liabilities, one would expect that it would have made that intention clear in the 2024 Act itself. If no such clear indication can be found in the language, the presumption that accrued rights were not affected by the change could be safely applied unless there is something in the circumstances of the legislation sufficiently strong to displace it.

There is nothing in the language of section 50 of the 2024 Act to suggest that the omission of sections 88 and 89 from the 2002 Act and the introduction of sections 87A and 87B was intended to take away rights and liabilities which had already accrued. The FTT recognised this in its decision (at paragraph 35) yet it came to the conclusion that that was indeed Parliament’s intention. It is necessary to consider the matters on which it relied in coming to that conclusion.

The first matter relied on by the FTT was the absence of transitional provisions. The 2024 Act allowed for these to be made, but none had been introduced. At paragraph 35 of its decision the FTT raised the possibility that “the absence of any transitional provisions preserving pre-existing liability was intended to mean that the costs regime in section 88 – 89 of the 2002 Act would no longer apply from the date that the 2024 Act came into force to all claims to costs, whether or not the costs were incurred before or after 3rd March 2025.” In paragraph 36 it appears to have given weight to that possibility:

“A saving provision might have been expected to preserve the “liability” of the RTM company under section 89 of the 2002 Act which had accrued prior to 3rd March 2025. However the repeal of sections 88 and 89 of the 2002 Act (clearly set out in section 50(4) of the 2024 Act) could be said to have indicated a contrary intention that from the date that the relevant provisions of the 2024 Act were brought into force, that “liability” would no longer exist.”

The FTT’s reasoning on the absence of transitional provisions reversed the effect of section 16(1) of the 1978 Act. No saving provision was necessary to preserve accrued rights and liabilities on the repeal of sections 88 and 89. That was already the effect of section 16(1) (headed “General savings”) which spells out that the repeal of an enactment does not, unless the contrary intention appears, affect any right or liability acquired, accrued or incurred under the repealed provision. The repeal of section 88 and 89 cannot itself be said to indicate a contrary intention (i.e. that existing rights and liabilities should cease to exist) as the 2024 Act is entirely silent on that issue. To the extent that the FTT relied on the absence of some positive indication that accrued rights were not to be preserved, it was in error.

The next matter referred to by the FTT, in paragraph 37, was that it was the purpose of the 2024 Act “to address what Parliament perceived to be a “wrong turn” or mischief in term of liability for costs by an RTM company and its members.” It developed that thought in paragraph 38 of its decision:

“This is reflected in the fact that the 2025 Regulations 2025 SI 131 brought into force at the same time on 3rd March 2025 a suite of associated amendments in 2024 Act (including sections 20CA and 20J of the Landlord and Tenant Act 1985 relating to service charges associated with cost incurred by landlord and similar entities in responding to right to manage claims). Those provisions in the 2024 Act, were designed to prevent or inhibit the problem of leaseholders being charged for the costs incurred by landlords and other entities in respect of right to manage claims. The amendments introduced by sections 20CA and 20J of the Landlord and Tenant Act 1985 relating to service charges would be of relatively little effect if they did not impact upon costs incurred before 3rd March 2025.

The FTT’s reference to the 2025 Regulations was to the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 which had brought the replacement of sections 88 and 89 by sections 87A and 87B into force. The FTT considered that other protections contained in the 2024 Act and which were brought into force by the 2025 Regulations “would be of relatively little effect if they did not impact upon costs incurred before 3rd March 2025”, and that that was a reason for giving retrospective effect to the changes introduced by section 50.

The FTT mentioned two specific provisions. Section 20CA of the Landlord and Tenant Act 1985, which was brought into force on 3 March 2025, limits the extent to which a landlord’s litigation costs may be regarded as relevant costs to be taken into account in determining the amount of a variable service charge. In section 20CA, subsection (1) introduces a general prohibition on taking such costs into account, but subsection (2) then allows a court or tribunal to order that subsection (1) should not apply to particular costs. The power to disapply subsection (1) is then restricted by subsection (3), including by a requirement that the relevant litigation costs must not have been incurred in connection with proceedings under Chapter 1 of Part 2 to the 2002 Act (i.e. in connection with litigation concerning the right to manage).

I am afraid I do not understand the point the FTT was making about section 20CA of the Landlord and Tenant Act 1985. The overlap between the costs which may be recovered by a landlord under section 88 and 89 of the 2002 Act and the costs which fall within the scope of section 20CA is very modest. Section 20CA is concerned only with "litigation costs" which are defined in section 20CA(9) as “any costs incurred, or to be incurred, by a person in connection with relevant proceedings to which they are party”. Litigation costs are not generally recoverable by a landlord under section 88, and not at all under section 89. An RTM company is only liable for costs which a landlord incurs as party to proceedings before the FTT concerning the right to manage if the FTT dismisses an application by the RTM company for a determination that it is entitled to acquire the right (section 88(3)). Necessarily, therefore, no litigation costs would be recoverable where a claim notice is withdrawn before any application is made to the FTT, as happened in this case. More generally, I do not see how the new restriction on the recovery of litigation costs through a service charge could be said to be “of relatively little effect” if it does not apply to costs incurred before 3rd March 2025. Section 20CA plainly applies to litigation costs incurred after its commencement, whatever interpretation is given to section 50(4) of the 2024 Act; whether it applies to litigation costs incurred before its commencement but sought to be included in a service charge payable after its commencement is a separate question on which I express no view. Whatever the answer to that question, the scope of the new section 20CA of the 1985 Act cannot provide any clue to Parliament’s intention as regards the effect of section 50 of the 2024 Act, let alone a clear indication that the usual presumption against retrospectivity was being disapplied.

The other new protection for tenants mentioned by the FTT was section 20J of the Landlord and Tenant Act 1985 which provides that non-litigation costs incurred by a landlord in connection with a relevant claim are not to be taken into account in determining the amount of a service charge payable by a tenant who is a non-participating tenant in relation to that claim. A claim in relation to the right to manage under the 2002 Act is a relevant claim for this purpose, and a “non-participating tenant” includes, in relation to such a claim, a tenant who is not a member of the RTM company. Such a tenant has no liability under sections 88 or 89 of the 2002 Act for a landlord’s costs incurred in consequence of a claim notice given by an RTM company of which they are not a member. Once again, I do not see how the effectiveness of the new provision can be said to be related in any way to the question in issue in this appeal.

The next point which the FTT took was about fairness. In response to a submission that it would be unfair for the new section 87A and 87B to be applied to costs incurred long before the 2024 Act was enacted, the FTT pointed out that from at least February 2024 C&CP was on notice of the provisions of the Bill which became the 2024 Act. That seems to me to be a point of no substance. A landlord is not able to determine the timing of an RTM company’s claim to acquire the right to manage and cannot organise its affairs in anticipation of a change in the law. As Lord Lloyd-Jones observed in the passage from his judgment in Lipton v BA Cityflyer Ltd quoted above, the general presumption that legislation is not retrospective reflects public expectations and notions of fairness and legal certainty.

The FTT’s expressed its conclusion on the interpretation of section 50 of the 2024 Act as follows:

“42.

The provisions of sections 87A and 87B of the 2002 Act (as inserted by the 2024 Act) were clear. Section 50 of the 2024 Act properly read amends the 2002 Act with immediate effect. So far as the Tribunal is aware there was no expectation that transitional provisions would be enacted by regulation or that costs incurred in respect of claim notices served before commencement would be subject to the former statutory regime.

43.

If the former statutory regime were to apply to claim notices served before 3rd March 2025, that would be an arbitrary distinction between categories of applicants for costs before that date and those applying after that date. That distinction would not be consistent with the statutory purpose. The statutory purpose evidenced by the explanatory note and the preamble was to change the regime so as to impose a general rule that RTM companies and RTM company members are not liable for the costs of others because of the RTM claim. The legislature must be taken to have intended that the amendment was to take effect on all claims as from 3rd March 2025.”

As to these observations, it is true that the relevant provisions are clear and that section 50 amends the 2002 Act with immediate effect, but (in the absence of contrary indication) it does so subject to the general saving provision in section 16 of the 1978 Act and so leaves accrued rights and liabilities undisturbed. The absence of transitional provisions to counter the effect of section 16 is a point in favour of applying the usual presumption. Characterising the distinction between costs incurred before and after the date of commencement as arbitrary does not advance the argument and begs the question whether accrued rights and liabilities were intended to be taken away. As Mr Serota pointed out by reference to the 2020 Law Commission report from which the 2024 Act originated, the statutory purpose of abolishing the landlord’s right to costs was to remove a deterrent to leaseholders pursuing the right to manage (Leasehold home ownership: exercising the right to manage, Law Com No 393, para.12.88). Retaining the right to recover costs incurred before the change in the law is not inconsistent with that purpose since all the risk had already been taken before the change took effect. The explanatory note and the preamble to the 2024 Act to which the FTT referred were entirely silent on the effect of the changes being introduced on accrued rights and liabilities.

None of the FTT’s reasoning supports its conclusion. There is nothing in the 2024 Act or the general circumstances to displace the saving effect of section 16 of the 1978 Act or the common law presumption in favour of preserving existing rights and liabilities.

For these reasons I allow the appeal on the first issue. C&CP is entitled to its costs under section 88 of the 2002 Act notwithstanding the change in the law which occurred after those costs were incurred and the application for their recovery was made.

Wallace made submissions to the FTT and provided details of the costs incurred by C&CP. The RTM Company made no submissions in response. The FTT would have allowed the recovery of costs of £1000 had it taken the view I do about liability in principle.

C&CP supported its application for costs with a statement of truth of the solicitor with conduct of the matter together with submissions which exhibited Wallace LLP’s invoice, which included VAT. The statement confirmed that the invoice was payable by C&CP. The FTT decided to disallow the VAT claimed on the legal costs incurred by C&CP because it considered that it was unclear whether VAT was recoverable. No point about the recoverability of VAT had been taken by the RTM Company and the FTT gave C&CP no notice that it considered there was an issue. In those circumstances I consider it was unfair for the FTT to disallow recovery of the appropriate sum in respect of VAT. The solicitor’s evidence was sufficient to demonstrate that the sum being claimed was no more than C&CP was liable to pay and in the absence of any challenge that should have been the end of the matter. The FTT’s approach deprived C&CP of the opportunity to meet the FTT’s own challenge by filing evidence confirming that it is registered for VAT and by reminding the FTT that it is not possible to opt to tax a residential property so that input VAT on expenditure relating to such a building cannot be recovered. It might also have drawn the FTT’s attention to the Tribunal’s decision in Metropolitan Property Realisations Ltd v Moss [2013] UKUT 415 (LC), which bears a striking resemblance to the appeal on this point.

The FTT also refused to permit the recovery of Land Registry fees. The evidence established that fees of £756 had been incurred and explained what these were for (Land Registry searches had been carried out and copy leases obtained for all 55 flats in the building together with the freehold and leasehold titles). The FTT decided that these searches had been unnecessary and would not have been commissioned if C&CP had expected to pay its own costs. There was no evidence to counter the material filed by Wallace LLP but the FTT noted a single reference in the time sheets provided in support of the claim to an “email to managing agent”. From this the FTT inferred that C&CP had managing agents operating on its behalf at the property and it further inferred that those managing agents would maintain records of registered leaseholders and in some cases official copies of the land register. Wallace was aware of the existence of other long leasehold interests and it should have been obvious, the FTT considered, that the failure to serve the claim notice on the other leaseholders would have been fatal to the claim.

The FTT did not consider it necessary to put any of these inferences to Wallace LLP for comment, despite the fact that no challenge had been made to the application and no notice had been given of the points the FTT had taken on its own initiative. That was unfair. Had the FTT raised its concerns its misconception about the management of the building could have been corrected. Contrary to the FTT’s assumption, C&CP does not manage the Property, nor do agents on its behalf. It is the freeholder, below whom in the chain of title are two head leaseholders. There was no reason for C&CP to have up to date information about the identity of occupational leaseholders or any other way of verifying the membership of the RTM Company and checking whether the required notices inviting participation had been given, as it was entitled to do.

I am satisfied that the unfair procedure adopted by the FTT prevented C&CP from participating effectively in the proceedings and deprived it of the opportunity of filing evidence to answer the points which appear to have troubled the FTT. That failure was a material one which affected the outcome of the proceedings. For that reason I give permission on this ground and allow the appeal. I set aside those parts of the FTT’s decision which deal with VAT and Land Registry fees.

I am satisfied on the basis of the evidence filed in support of the appeal that VAT is properly claimable on legal fees and disbursements. The time allowed by the 2002 Act for a landlord to decide whether to contest a claim by filing a counternotice is short, only one month, and I am also satisfied that it was reasonable for Wallace LLP to apply to the Land Registry for relevant title documents as soon as it was instructed. On that basis the search fees of £756 plus VAT are recoverable.

I allow the appeal for the reasons I have given. The total sum payable by the RTM Company is £1,756 plus VAT of £351.20, totalling £2,107.20. I set aside the FTT’s award of £1,000 and substitute an award of £2,107.20.

The sum I have awarded is payable both by the RTM Company and by all who are or were its members. That is the effect of section 89(3) of the 2002 Act. The FTT made a point of saying that the members of the RTM Company had not been joined as parties to the proceedings and that it would not be just for it to make an order which affected individuals who had not been joined. In view of those comments, which are liable to mislead, I should make it clear that the liability of current and former members of the RTM Company exists without the need for any further order and irrespective of the fact that they are not parties to the proceedings.