A landlord has been told they cannot recover legal costs from leaseholders through a property service charge. Upper Tribunal Judge Elizabeth Cooke, sitting in Triplark Ltd v Howard & Ors, ruled that none of the £55,500 costs in dispute were covered by a clause in the leasehold agreement.

The judge did not rule out that ‘general legal advice on the management of the building’ might be recoverable under the terms of the contract, but without specific examples of these costs, she said the tribunal could not include them.

Cooke described the litigation over purpose-built flats in north London as ‘depressingly extensive’, covering a number of judgments over a decade of proceedings.

The final issues of principle to be resolved was over recoverability of legal costs. The leasehold agreement stated that the landlord could charge for ‘ancillary costs’ in connection with managing the building: the landlord argued these costs should include general legal advice on the management of the building, advice about the recovery of rent and service charge arrears, litigation costs incurred in recovering rent and service charge arrears, and the costs incurred by the landlord in proceedings against third parties.

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The First Tier Tribunal ruled that none of these costs could be recovered from the leaseholders through the service charge – a decision which the landlord appealed.

Cooke agreed that management of the building was not limited to the cost of computing and collecting rents. Neither was it impossible to foresee that contentious issues might arise which might be included in management costs.

But the issue at stake was the interpretation of ‘ancillary costs’. The judge said these words could not carry the weight that the landlord placed on them and were ambiguous. ‘I am quite sure they cannot cover litigation, because litigation is not “ancillary” to management – the word implies something incidental and subordinate, whereas litigation is a step beyond management,’ said Cooke.