The starting point
The First-tier Tribunal (FTT) is, for most purposes, a no-costs jurisdiction. Rule 13(1) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 permits a costs order only in defined circumstances including a case where a party "has acted unreasonably in bringing, defending or conducting proceedings". That orthodoxy has come under pressure not from Rule 13 but from the words of S124(2) of the BSA.
Empire Square
In Empire Square (LON/00BE/HYI/2023/0013; LON/00BE/ BSB/2024/0602, 5 June 2025), summarised by John McMillan in the March 2026 edition of this Update, the FTT held that a freeholder's legal costs of responding to a remediation order (RO) application, and of pursuing its own remediation contribution order (RCO), were "costs incurred … in connection with relevant defects" within s124(2). The reasoning ([172]-[198]) was purposive: the litigation had driven remediation; the legal costs would not have been incurred but for the defects; and it would be "absurd" to leave them with innocent parties. Paragraph 9 of Schedule 8 of the BSA, which prevents landlords passing legal costs to qualifying leaseholders, was said to support that reading.
Hallings Wharf
Less than a year later a differently constituted tribunal declined to follow Empire Square. In Hallings Wharf Studios (LON/00BB/BSB/2024/0011, 21 May 2026) the Secretary of State, having obtained an RCO for £3.68m of completed remedial works, also sought over £1m in litigation costs, introduced by amendment at the pre-trial review. At [146] the tribunal was "doubtful" that s124(2) could be construed to include litigation costs at all. Parliament had given illustrative examples in s124(2A) and litigation costs were conspicuously absent; and the jurisdiction had been conferred on a body which is for the most part a no costs tribunal. In any event, the Empire Square reasoning depended on the proceedings being necessary to achieve remediation, which could not be said where the works were already done.
At [147]-[149] the tribunal added that, even if jurisdiction existed, it would not have been just and equitable to include costs, the claim having been sprung on a respondent which had reasonably conducted the litigation on the footing that there was no adverse costs risk. It also described as "wholly impractical" ([132]) the suggestion that it declare liability under s124(4)(aa) and leave quantification to a county court (as was done in Empire Square).
Lincoln v Plantview
City of Lincoln Council v Plantview Ltd (MAN/32UD/ BSB/2025/0002, 15 June 2026) addressed a different question: whether a local authority's legal costs of negotiating a temporary accommodation agreement after a decant were "temporary accommodation costs" within s124(2A)(c) and s124(5). The tribunal held that they were not ([61]): the listed examples (removal, storage, travel) were costs borne by displaced occupiers and not the applicant, and the applicant's professional and legal costs were "one step removed". Of wider significance is the statement at [62] that s124 is not a general indemnity for all costs arising from relevant defects but a mechanism for defined categories which the tribunal cannot expand. That sits uneasily with Empire Square.
Precedent
None of these decisions binds any other tribunal; Hallings Wharf said so expressly of Empire Square at [137]. Until the Upper Tribunal (UT) addresses the point, inconsistency at first instance is to be expected.
Analysis
If Empire Square is right, problems follow which Parliament has arguably not addressed:
- Asymmetry. A successful applicant recovers its costs in full under s124(2); a successful respondent remains confined to the unreasonable-conduct threshold in Rule 13.
- Mechanics. There is no provision for the time within which such a claim must be made, for summary or detailed assessment, or for the effect of settlement offers of the kind governed by CPR Parts 36 and 44. Rule 13(5) imposes a 28-day limit on conventional costs applications; nothing equivalent exists for costs claimed as a head of recovery under s124.
- Historic proceedings. Where the costs of an earlier s123 application are sought in a later s124 application, s123 itself has no costs mechanism, and it is arguable that historic litigation costs are not costs of a "relevant step" within s 120(4A).
- Non-parties. An RCO may be sought against associates who took no part in the earlier proceedings. Making them liable for the costs of litigation to which they were strangers is hard to reconcile with any conventional costs jurisdiction.
- Drafting. LFRA 2024, which inserted s124(2A), also expressly addressed "legal costs" in paragraph 9 of Schedule 8. The omission of express reference to “legal costs” in s124(2A) is difficult to treat as accidental.
For now, Hallings Wharf is the more textually disciplined analysis. Whether it prevails is a question for the UT.
However, Hallings Wharf has difficulties of its own. Its logic is easiest to apply to a well-resourced institution such as the Secretary of State or an institutional/commercial freeholder, but if the “interested person” applicant is of modest means (e.g. a residents’ management company or a group of leaseholders), those innocent parties have to fund a contested application to secure the remediation of defects which they did not create. The Secretary of State, with the works complete and a late-pleaded £1m claim, was an unattractive candidate for legal costs. A leaseholder-owned freeholder litigating to get the works done might be met with more sympathy.
The wider point is that Rule 13 was drafted for a jurisdiction of financially more modest service charge and rent disputes. RCO claims are now routinely worth many millions of pounds, are fought with leading counsel and expert evidence over multi-week hearings, and determine where the cost of remediating an entire building will fall. Every other forum handling disputes of that scale proceeds on the basis that the loser should ordinarily contribute to the winner’s costs. If s124 does not supply that answer, and Hallings Wharf suggests it does not, the case for a bespoke costs regime, whether by amendment to the Rules or to the BSA itself, deserves serious consideration.
