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Legal changes

Fixed recoverable costs in housing conditions claims: The Government response

The Government has decided to extend fixed recoverable costs to all civil claims, including housing conditions claims.

The background

On 31 July 2017, Sir Rupert Jackson submitted his report on extending fixed recoverable costs (FRC) in civil litigation cases. Sir Rupert was, and remains, very much pro FRC. The Government’s consultation on this issue took place in early 2019 and the outcomes were expected shortly thereafter. However, a few minor issues cropped up (including Brexit and a global pandemic) and so it is only now that we have the long-awaited outcomes of that consultation.

The outcomes

The Government has decided to extend FRC to all civil claims, including housing conditions claims, which fall into the existing fast track regime, that is case with a value of £25,000 in damages. There will also be a new category of ‘intermediate’ cases for claims with a value of between £25,000 and £100,000 to be assigned to an expanded fast track, in respect of which the FRC will also apply. 

The ramifications of the Government’s response will be far reaching, not least in the context of housing conditions claims where the consultation revealed polarised views. Claimant lawyers contended that fixed costs would make it unprofitable for them to undertake this type of work, meaning that claimants would not have access to appropriate legal advice. They also argued that the most vulnerable in society would be hardest hit by FRC. 

Meanwhile, landlords and their representatives maintained that claimants’ legal costs were disproportionately high when assessed in the context of the claims, both in terms of complexity and in damages awarded. Landlords in the social housing sector contended that their much needed, and limited, resources were being diverted to claimant law firms, thereby hindering their ability to fulfil their primary role as a provider of affordable housing to those most in need. 

The Government says of the FRC regime:

“The case for extending fixed recoverable costs remains strong: uncertainty of costs hinders access to justice, whilst certainty of costs set at a proportionate and fair level enhances it”.

With regard to vulnerable claimants, the Government proposes that a 25% uplift on FRC will adequately compensate claimant lawyers for the additional time required in assisting vulnerable claimants. “Vulnerable”, however, has not been defined and that is likely to lead to disputes. 

In practice, the FRC will extend to all housing conditions claims with a value of up to £25,000. In the rare instances where the pleaded value of the claim exceeds £25,000, the case will either be allocated to the fast track as an “intermediate” case, or it will be allocated to the multi-track. It is likely that complexity will be a key factor in track allocation. 

For cases falling squarely into the fast track bracket, the case will be allocated to one of four bands, depending upon the value of the damages claimed and the complexity of the case. Band one will be for the simplest cases, whilst band four will be reserved for the most complex. The value of FRC which a party may recover at each stage in the litigation process will increase, band by band.

The differential in FRC between bands is likely to give rise to disputes between the parties regarding band allocation. In an attempt to deter parties from routinely disputing band allocation, there is intended to be a £150 costs liability for any party which unsuccessfully argues for allocation to a particular band. However, in practice, such a small penalty may not prevent band allocation disputes.

Other developments worth noting in the context of housing conditions claims:

  • Counsels’ fees will only be ring fenced in band four cases;
  • There will be an ‘escape clause’ permitting a party to apply to exit FRC in the fast track in exceptional cases;
  • There will be a 35% uplift added to FRC where a Part 36 offer is made and rejected, subject to the usual rules around Part 36 offers;
  • There will be a 50% uplift on FRC in the event of ‘unreasonable behaviour’; and
  • There will be a 12.5% uplift on costs payable to a party living in London who instructs lawyers who practice in London.

The likely impact

These changes are unlikely to be the ‘silver bullet’, bringing about the end to the rise in housing conditions claims. Many claimant firms have systems in place designed to streamline their processes. Those firms may well consider that this area of law will remain profitable under the FRC regime. They may, however, adjust their strategy, perhaps reducing the proportion of matters where they issue proceedings.

For landlords, FRC offers increased certainty, enabling them to assess more accurately the litigation risk in individual cases. Currently, many landlords prefer to settle poorly presented claims, because of the risk of having to pay unlimited costs in the event of the claimant being successful; those same landlords may now be prepared to run more cases to trial secure in the knowledge that the claimants’ costs are capped by FRC.  

The overall effect of FRC may, therefore, be a decrease in housing conditions proceedings, but an increase in the proportion of litigated matters which proceed to trial.

Speak to our social housing solicitors for advice on the issues affecting your sector. 

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