Can agents charge for their costs in dealing with complaints by landlords?

Here is an interesting (if rather long) question to the blog clinic from Sarah, who is a landlord:

Briefly I instructed the agent to manage a house I let to students. Things did not go well so I terminated the agreement between us in accordance with his terms of business.

He initially refused to cease acting, firstly saying he had already entered into another year’s tenancy with 3 of the same tenants and one other but when this proved to be untrue he said he was entitled to continue to act whilst any tenant introduced by him remained in occupation and I couldn’t terminate the agreement without his consent, thiswas also untrue.

He eventually said he would stop trying to “sign them up” for another tenancy and hand the house over to my other agents but with the same tenants if they wished. When the tenancy came to an end he deducted £1100 from the final month’s rent he had collected for “introduction and standard letting fee”, it turned out he had entered into a new tenancy with the students for the next academic year in the meantime.

When I complained and asked for my money back he threatened to counterclaim £1,500 for his costs of dealing with my complaint and £1000 for grief, distress inconvenience and defamation if I pursued a claim against him.

I complained to TPO who upheld my complaints but only awarded me half of the wrongly taken money. With hindsight it would probably have been sensible to accept this and put it all down to experience, however I wasn’t given the opportunity to respond to the derogatory and untrue allegations he had made about me in his submission to TPO and only saw these submissions when I received the TPO decision and “saw red”.

I followed the pre-action protocol and have now been contacted by a large international firm of solicitors who I believe may be acting for him under his PI insurance.

I still haven’t received any clear details of his defence but have been told her will pursue his claim for costs, distress etc and that I may face a wasted costs order. I’m also sure I haven’t said or published anything about him which I can’t prove to be true. His solicitors have now referred me to Aerospace v Thames Water (CA 2007) to support his claim for the costs of his time responding to my complaint.

I’m sorry this is a bit long-winded. Basically I feel confident to have a go myself at a small claim but am frightened about the allegation that I will be liable for his distress and ever increasing costs.

Really the question is what is my risk of a successful counterclaim from him, and costs from his solicitors, if I proceed with my claim?

I think you need to take some advice from a litigation solicitor, particuarly as your agent has done so.  However here are a few comments:

The 2007 Court of Appeal decision the case of Aerospace v Thames Water is about the circumstances under which a court will made an award to a party regarding staff costs of investigating and dealing with a wrongful claim.  You can read a pdf report about it here.

There are three things to consider (said the court) :

• Can the company actually prove that the staff time was diverted to deal with the issue?
• The diversion of time must have caused significant disruption to the business, and
• If they had not had to deal with the claim, the staff involved would have been doing ‘revenue generating activities’ to the value at least of their salary for the period in question

However note that this only applies in the case of a ‘wrongful claim’.  If your claim is fully justified then your agent will not be able to claim for his time in dealing with it.  Even if you lose your claim, it is highly unusual for anything other than solicitor’s costs (if a solicitor is used) to be awarded.

The Aerospace case also refers to ‘staff’. I would be surprised if this case applied also to the business owner’s own time in dealing with the complaint.

But if your claim is sound you should be all right anyway.

So far as solicitors costs are concerned, whether you are ordered to pay these (if you lose) will depend largely on the amount of the claim, and what the final award in your case is.

If your claim is under £5,000 it will fall within the ‘Small Claims’ court where the normal rule is that costs are not awarded. For claims more than that costs may be awarded against you if you lose, and also perhaps if the Judge reches the same decision as the Property Ombudsman.

So my advice is not to proceed with a court claim unless you are pretty sure that you can get a better award than that made by the Ombudsman.  But speak to a local litigation solicitor about it.