Who pays the lawyers?

The leaseholders were seeking a refund of the £1,020 in legal fees to resolve the dispute, as they considered that the estate and management company had failed to correctly interpret the details of the residents’ voting rights, and as such were responsible for the disputed fees.

The estate and management company did not believe that their service fell short in this instance, stating that they did not agree to cover legal fees to resolve the dispute and no evidence had been provided to suggest otherwise, therefore the legal fees should be covered by the leaseholders.

Investigation

The Ombudsman noted that there was a disagreement with regards to the voting rights of the residents at the property between the directors of the resident management company (the leaseholders) and the estate and management company at the Annual General Meeting.

To resolve the dispute, the estate and management company opted to abort the meeting and seek legal advice regarding the voting rights of the residents costing £360. The leaseholders also opted to seek independent legal advice in an attempt to resolve the dispute in a swift manner resulting in a further charge of £660.

The leaseholders opted to seek legal advice…

The leaseholders felt that the estate and management company should be responsible for the entire legal costs as it was their misinterpretation of the details regarding the residents’ voting rights which caused the necessity for legal advice.

Contentious issue

Having considered the available evidence, the Ombudsman noted that the dispute at the AGM was a contentious issue. It was clear from the fact that both parties independently sought legal advice that the interpretation of the voting rights terms was not as clear as believed by the leaseholders. Therefore, the Ombudsman concluded that as both parties were clearly unable to come to an agreement on the interpretation of the voting rights, the act of seeking legal advice to resolve the dispute was fair and reasonable.

The leaseholders said that the estate and management company verbally agreed to cover the legal costs, but the agent denied this. As there was no evidence of this conversation the Ombudsman was unable to verify the claim.

Having considered the management agreement, the Ombudsman noted that it stated “issues of legal proceedings or instructions to Solicitors for Breaches of Covenant or other matters will be charged at £50, plus associated costs and disbursements (such sums will be recharged to the respective Leaseholder or Freeholder account).”

Legal opinion required – or not?

Based on the above, the Ombudsman concluded that the management agreement indicated that where legal involvement was needed, the cost would not be paid for by the estate and management company. Overall, the Ombudsman found the actions taken by the estate and management company to be fair and reasonable and therefore was satisfied that they were not liable for the fees.

With regards to the legal costs incurred by the leaseholders, the Ombudsman noted that the leaseholders stated that this was sought as they were unaware the estate and management company had also opted to seek legal guidance.

The email from the leaseholders to the management company after the AGM stated that they disputed the claim that they had agreed for solicitors to be involved, so they should not have the expense of the legal fees. The leaseholders then emailed the management company advising that if they were “still in the process of obtaining advice from any other source this should cease immediately”. However, at this stage, legal advice had already been sought by the management company who received advice later that day.

Deliberation

Based on the evidence, the Ombudsman concluded that on the balance of probability, the leaseholders were aware or should have been reasonably aware that the management company was already seeking legal advice on this issue. Therefore, she did not agree that the additional legal costs incurred by the leaseholders were ultimately necessary or the responsibility of the management company.

The Ombudsman was satisfied that the management company were able to obtain legal advice within a reasonable timeframe and as such found that the management company’s actions were acceptable.

Outcome

Given that the dispute centred around the need for a clear interpretation of voting rights, the Ombudsman considered that obtaining legal advice to resolve the issue was a reasonable approach. The evidence indicated that the leaseholders were aware of the management company’s intentions to obtain this advice and that, under the management agreement, the cost would be to them. As such, the Ombudsman did not support this complaint and did not make an award for compensation.