When Can My Freeholder Recover Litigation Costs Through The Service Charge?
The recent Upper Tribunal case of Walsh v Star and Garter Mansions (Management Company) [2026] UKUT 267 (LC) confirmed that this lease permitted a freeholder to recover litigation costs incurred in defending proceedings arising due to the challenges on how service charges were apportioned, through the service charges.
This is an important case reminding us that there is always a risk that legal fees of the opponent will have to be paid back, and can be recovered by the Freeholder through service charge, even if the lease does not expressly state “litigation costs”.
Background Walsh v Star and Garter Mansions (Management Company)
The dispute arose at Star and Garter Mansions in south-west London. The building comprises 17 residential flats and two commercial units. The leaseholder, Mr Walsh, challenged the landlord’s attempt to recover legal costs incurred in separate county court proceedings relating to service charge apportionments. The Freeholder wanted to recover the legal fees they incurred through the service charges. The lease stated that leaseholders were liable for “the fees of the Lessor’s Managing Agents and Solicitors for the collection of the rents of the flats in the building and for the general management thereof”
Mr Walsh argued that the clause didn’t clearly state that litigation costs could be recovered, and that “general management” should not permit contentious court proceedings and associated costs.
The matter proceeded to the First-tier Tribunal who found in favour of the freeholder. It confirmed that the lease expressly contemplated “solicitor’s costs” and by the extension, litigation costs would also be covered as service charge arrangements were connected to the management of the building. The tribunal therefore ordered that the legal costs could be recovered through the service charges.
The leaseholder did not agree with the decision and so appealed to the Upper Tribunal.
At the Upper Tribunal, the Judge upheld the decision, and referred the matter back to the lease. The Judge referred to the clause which expressly used the term “landlord’s solicitors.” The Tribunal considered whether solicitor’s fees and legal expenditure was something the parties intended when the lease was drafted. The tribunal then looked at the reason behind the legal fee incurrence, i.e. the county court challenge which ultimately was to do with service charge apportionment and thus management of the building.
The tribunal deemed those legal costs to fall directly under what was intended in the lease.
Why is this decision significant?
This case is very important as it demonstrates the approach of the courts and tribunals when they consider service charge recovery , and how very case specific it is. The Tribunals decision does not confirm that all litigation costs are recoverable through the service charge but it confirms that:
i. The tribunal will revert to the wording of the lease
ii. If there is references to solicitor’s fees within the lease, this may lead to the tribunal finding in favour of a landlord who wishes to recover legal costs.
iii. Litigation which is connected to the buildings’ management will likely be captured under a “management-related” service charge clause in a lease
Caution to leaseholders, in that they cannot assume just because the lease doesn’t expressly refer to litigation will a landlord not be able to recover their legal fees. It goes back to the heart of the lease being the guiding document and those provisions being scrutinised when assessing whether legal costs can be recovered through service charges.
Freeholders and landlords will be content with the decision as it opens up the possibility for them to recover their legal costs incurred from the leaseholder in circumstances when it is to do with the management of the building.
The decision of the Upper Tribunal is clear – go back to the lease.
As service charge disputes continue to generate significant litigation, both leaseholders and landlords should seek specialist advice before pursuing or challenging substantial legal cost claims.
Concerned about service charge disputes or recovering legal costs under a lease? Our experienced Property Disputes Solicitors advise both leaseholders and freeholders on service charge challenges, lease interpretation, litigation cost recovery, and landlord and tenant disputes. We can help you understand your rights, assess the strength of your position, and guide you through tribunal or court proceedings. Contact our Property Disputes team on 0330 822 3451 for expert advice tailored to your circumstances.