Practice Guide 38 – Costs

Updated: October 2011

Update

This edition of the guide replaces the July 2011 edition. Amendments have been made as a result of the Land Registration (Amendment) Rules 2011, which change the definition of ‘conveyancer’ to make it consistent with the Legal Services Act 2007.

Scope of this guide

This guide deals with costs involved in disputed applications to the registrar, in proceedings before the Adjudicator to HM Land Registry in connection with claims for indemnity and other general cost points. The guide is aimed at conveyancers.

1 Abbreviations and terms used

In this guide:

‘business day’ means a day on which Land Registry is open to the public

‘conveyancer’ means an authorised person within the meaning of s.18, Legal Services Act 2007 who is entitled to provide the conveyancing services referred to in paragraphs 5(1)(a) and (b) of Schedule 2 to that Act, or a person carrying out those activities in the course of their duties as a public officer. It also includes an individual or body who employs or has among their managers such an authorised person who will undertake or supervise those conveyancing activities (r.217A, LRR 2003)

‘CPR 1998’ means the Civil Procedure Rules 1998

‘LRA 2002’ means the Land Registration Act 2002

‘LRR 2003’ means the Land Registration Rules 2003

‘the adjudicator’ means the Adjudicator to HM Land Registry

‘the adjudicator rules’ means the Adjudicator to Her Majesty’s Land Registry (Practice and Procedure) Rules 2003 as amended by the Adjudicator to HM Land Registry (Practice and Procedure) (Amendment) Rules 2008

‘the referral to the adjudicator rules’ means the Land Registration (Referral to the Adjudicator to HM Land Registry) Rules 2003

2 Costs in disputed applications to the registrar

2.1 Objections to applications

Unless satisfied that an objection to an application is groundless (in which case the application will not be affected), the registrar must establish whether it is possible to dispose of the objection by agreement. If it is not possible to do so the registrar must refer the matter to the adjudicator (s.73(7), LRA 2002). Practice Guide 37 – Objections and disputes – A guide to Land Registry practice and procedures explains the procedures that have to be followed. Costs incurred in connection with the proceedings before the adjudicator are covered by the adjudicator rules. See section 3 Costs in proceedings before the adjudicator.

Any costs that relate to the application and the objection, but do not relate to the proceedings before the adjudicator, are described as costs incurred in connection with ‘proceedings before the registrar’. These costs may, in certain circumstances, be recovered from another party through Land Registry.

This may arise because an objection does not reach the adjudicator. It may be resolved by agreement or the application or objection may be withdrawn. If the parties resolve the matter by agreement, however, the settlement should have dealt with the question of costs, so that an application for costs to the registrar should not be necessary.

The parties may also incur costs after a matter has been referred, that do not relate to the proceedings before the adjudicator, for example dealing with the implementation of the adjudicator’s decision.

2.2 Request for an order of the registrar

R.202, LRR 2003 provides that a person who has incurred costs in relation to proceedings before the registrar (‘the requestor’) may request the registrar to make an order requiring a party to the proceedings (‘the respondent’) to pay the whole or part of those costs. However, the registrar may only make such an order where the costs have been occasioned by the unreasonable conduct of the respondent in relation to the proceedings.

The request for an order must be made in writing by 12 noon on the 20th business day after the completion of the relevant proceedings. Where there has been a dispute that has been referred to the adjudicator, the proceedings before the registrar will not usually be completed until the adjudicator or the court has reached a decision and Land Registry has given effect to any order or taken such other action as may be required as a result of the decision.

The request for the order must:

• identify the respondent against whom the order is sought and include an address for service of notice on the respondent

• state in full the grounds for the request

• give an address to which communications may be sent to the requestor, and

• be signed by the requestor or their conveyancer.

2.3 Notice to be given

If a valid request is made the registrar must give notice of the request to the respondent against whom the order is sought. The notice will give the respondent a period of 20 business days or such other period as the registrar thinks appropriate, to deliver a written response.

2.4 Response

The response by the respondent must:

• state whether the respondent opposes the request

• if they do, state in full the grounds for that opposition

• give an address to which communications may be sent to the respondent, and

• be signed by the respondent or their conveyancer.

2.5 Decision

The registrar must decide whether to make an order that costs should be paid or are not required on the basis of:

• the written request

• any response

• all the circumstances including the conduct of the parties, and

• the result of any enquiries considered necessary.

2.6 Order by the registrar

The registrar must send all the parties written reasons for any order the registrar makes. If the registrar makes an order that costs should be paid then that order may:

• require a party against whom the order is made to pay the whole or part of the costs incurred by the requesting party, and

• specify the sum to be paid or require the costs to be assessed by the court (if not otherwise agreed) and specify the basis of the assessment to be used by the court.

2.7 Basis of assessment

In all cases the court will only allow a party to recover costs that have been reasonably incurred and are reasonable in amount. There are two types of assessment, which are set out in r.44.4, CPR 1998. They are:

• standard. This means that the court will also consider whether the costs are proportionate to the matters in issue. In addition, if there are any doubts whether costs were reasonably incurred or reasonable and proportionate in amount, they will be resolved in favour of the paying party.

• indemnity. Proportionality is not relevant here and any doubts whether the costs were reasonably incurred or reasonable in amount will be resolved in favour of the receiving party.

2.8 Enforcement of order

An order by the registrar about costs is enforceable as an order of the court (s.76(4), LRA 2002). This means that if the party ordered to pay the costs does not comply with the order, it is the courts and not Land Registry that have the power to enforce it.

If the order specifies the amount to be paid, it can be enforced in a county court. Further details are available from a local county court or from the courts service website (www.hmcourts-service.gov.uk) which contains details of all local county courts and the areas they cover.

If the order states that costs are to be assessed by the court if not agreed, then a formal application for detailed assessment will be necessary if a dispute arises over the amount payable. Applications for detailed assessment should be made to the local county court, save in respect of cases that fall within the London Group of County Courts where the Supreme Court Costs Office (SCCO) will be the appropriate office. The procedures to be followed are set out in detailed rules that can be found in rule 47 CPR 1998. The application must be made within three months of the registrar’s order.

2.9 Appeal

A person who does not agree with an order of the registrar about costs may appeal to the county court, that may make any order that appears appropriate (s.76(5), LRA 2002).

The procedures to be followed are set out in detailed rules that can be found in the CPR 1998. An appeal must be made within 28 days after the registrar has given written reasons for the decision (CPR Part 52 Practice Direction 52 paragraphs 17.1-17.4). Further information about making an appeal can be obtained from the local county court or the Courts Service website and the form for making an appeal together with full notes on how to complete that form are downloadable from www.hmcourts-service.gov.uk. A sealed copy of the notice of appeal should be served on Land Registry. As mentioned in section 2.8 Enforcement of order, the Courts Service website also contains details of all local county courts and the areas they cover.

3 Costs in proceedings before the adjudicator

Once a matter is referred by the registrar to the adjudicator under the referral to the adjudicator rules, it is governed by ss.107-114, LRA 2002 and the adjudicator rules. These make provision about the payment of costs of a party to proceedings before the adjudicator by another party to the proceedings.

It should be noted that the adjudicator has no power to make an order for costs in respect of the proceedings before the registrar whether incurred before or after the reference to the adjudicator.

4 Costs in connection with claims for indemnity

The circumstances in which a claim for indemnity may arise and the procedures to be followed are explained in Practice Guide 39 – Rectification and indemnity. This section deals with claims to be indemnified in respect of costs or expenses incurred by the claimant.

4.1 Consent of the registrar

Only costs and expenses incurred with the registrar’s consent are recoverable, unless:

• they had to be incurred urgently, and

• it was not reasonably practicable to apply for consent (paragraph 3(2) of Schedule 8, LRA 2002).

Consent is not required in these circumstances.

Where consent is required, it should be sought beforehand but it is possible to ask the registrar to give approval afterwards. A claimant will, however, run the risk that approval will not be given and the costs and expenses in question will not be recoverable.

We, therefore, recommend that, except in the most urgent of cases, Land Registry is contacted as soon as it appears that there may be a mistake in the register that could lead to a financial loss of some kind. This will enable us to investigate the matter at an early stage. It will also help us to ensure that matters are dealt with in the quickest and most cost-effective way, avoiding unnecessary costs.

If consent is refused, those costs and expenses cannot be recovered as indemnity. However, it must be stressed that the fact that consent is given does not automatically mean that they will be recoverable. The claimant will still have to show that they are entitled to indemnity and that their claim meets the criteria set out in Practice Guide 39 – Rectification and indemnity.

These provisions relate to all costs and expenses that a claimant wants reimbursed by Land Registry, including those incurred in pursuing the claim for indemnity. However, they do not apply if the claimant and Land Registry disagree as to the claimant’s right to indemnity or the amount payable and the claimant applies to the court for the matter to be determined. In that case, the registrar’s consent is not required in connection with any costs or expenses relating to those proceedings. The usual principles regarding recovery of costs in connection with court proceedings will apply and the unsuccessful party will usually be required to pay the other side’s costs.

4.1.1 Obtaining consent

The following paragraphs explain how we will approach a request for consent and what information we will ask a claimant to provide.

4.1.2 Consent for investigative and other non-litigious costs

In most cases a claimant will, at first, be looking for consent to incur costs and expenses in carrying out investigative work. The most common examples are legal and surveyor’s fees. When we receive such a request, we will consider whether the costs and expenses that the claimant wishes to incur are reasonable, both in:

• nature

• amount.

In order to do this we will ask the claimant to provide the following information:

• What steps exactly does the claimant propose to take?

• What is the purpose of those steps?

• What is the estimated cost?

• How has that cost been calculated?

We will generally restrict any consent given, as to the type of costs and expenses covered and/or the amount.

4.1.3 Consent for litigious costs

If a claimant is considering judicial proceedings and may wish to claim reimbursement of their costs from Land Registry as indemnity, they should ensure that Land Registry has given specific consent to incur costs and expenses in those proceedings. This applies to all judicial proceedings, including those incurred as a result of a dispute being referred to the adjudicator.

4.1.4 Reasonable costs and expenses

We sometimes find claimants keen to embark on judicial proceedings where there is a dispute over the existence of a mistake, but where alteration of the register (if a mistake is finally established) would make very little difference to either or both of the parties. On other occasions, the cost of judicial proceedings would be out of all proportion to the value or importance of the land.

In such cases, we will remind the claimant when giving consent that:

• they will only be entitled to claim reasonable costs and expenses, and

• we will consider all claims to ensure, in respect of any work done, both that it was reasonable to carry out the work and that the amount charged for that work is reasonable.

One of the factors that we will take into account is the value of the land in dispute in relation to the costs incurred. Each case will be considered on its own merits but as a general rule we will look very carefully at costs that exceed twice the value of the land. The claimant should be prepared, in such a case, to give a detailed and persuasive explanation as to why they consider the costs claimed are reasonable.

4.1.5 Extent of consent for judicial proceedings

We will ask the claimant to provide full details of the proposed action and why they wish to take that route. We need to have as much information as possible in order to reach a decision as, once given, our consent cannot be withdrawn. Neither do we have the power to impose conditions.

Normally, consent will be given for the whole of the judicial proceedings in question. However it will not extend to any appeal, which will be treated as a separate action.

There may be some circumstances in which it will be appropriate to limit our consent to a specified stage of the judicial process, but this will not be the general rule. See section 4.1.6 When a staged consent might be appropriate.

4.1.6 When a staged consent might be appropriate

• Urgent cases when a claimant has asked Land Registry to give consent immediately. Our usual course of action will be to give limited consent so the claimant can take just enough action as is necessary to protect their position. The case can be considered in more detail afterwards in the usual manner.

• Unusual cases when we think that we may be able to make a fair offer of indemnity that will enable the parties to settle, but we do not have sufficient information to make a decision. In such cases, it may be appropriate to give consent up to, say, the filing of a defence. We will then consider the matter again in the light of the further information available at that stage. The reason for limiting consent in this way is to see if we can make a fair offer of indemnity to enable the case to settle. If we can and this is refused, we will consider not extending the consent any further. Otherwise, consent will usually be extended to continue the action (but not any appeal).

4.1.7 Appeals

We will adopt the same general approach as outlined above, but we will ask the claimant to provide the following additional information:

• The grounds for the appeal. This will enable us to assess the effect of a successful appeal. For example, the appellant may be successful, but may have limited their appeal to an area of land falling within the general boundaries rule. There would not therefore be any mistake in the register, even if they won on appeal (because, whatever the outcome, the title plan would not require amendment). It would be wrong to give consent in those circumstances as it could give the claimant false expectations. We will not, as a general rule, analyse the merits of the legal arguments. In most cases we will work on the basis that the claimant has reasonable grounds to appeal, if the court has given permission.

• The amount of the costs incurred to date. It is quite possible that the costs will, by now, have exceeded twice the value of the land. The claimant will therefore have to give good reasons why it is reasonable to incur further costs in an appeal.

• The value of the land in question. This will be required in order to assess whether the total amount of costs and expenses will be reasonable.

4.1.8 Refusing consent

We will normally refuse consent where:

• there is no dispute over the existence of a mistake in the register, and

• we have made a reasonable offer of indemnity that would enable the case to be settled but has been unreasonably refused.

If, at any time, the claimant rejects a reasonable offer that would enable the dispute to settle, we will ask the claimant to explain in detail why they took that course of action. If we still consider that the offer was reasonable and that it was rejected unreasonably, we will normally refuse consent. If we have already given consent, before the offer of indemnity was made, any claim for costs incurred after the offer was rejected is very likely to be refused, on the ground that they were not reasonably incurred.

4.2 Expenses incurred when a claim is not established

The registrar may agree to reimburse an unsuccessful claimant for the whole or any part of any reasonable costs and expenses incurred in pursuing the unsuccessful claim. The claimant should have obtained the registrar’s consent before incurring the costs, but the registrar can still agree to reimburse the costs if they subsequently approve them or consider that the costs or expenses had to be incurred urgently and it was not reasonably practicable to apply for consent.

4.3 Reduction in amount of costs payable

As with any claim for indemnity, the amount of any payment of costs or expenses may be affected by such factors as fraud or lack of proper care on the part of the claimant (paragraph 5 of Schedule 8, LRA 2002). These matters are covered by Practice Guide 39 – Rectification and indemnity.

4.4 Interest

Under paragraph 9 of Schedule 8, LRA 2002 and r.195, LRR 2003, simple interest is payable on the agreed amount of any costs or expenses. This will be calculated as follows.

Where the period specified under r.195(1), LRR 2003 starts on or after 10 November 2008, at 1 per cent above the applicable Bank of England base rate¹ or rates.

¹ Bank of England base rate means (a) the rate announced from time to time by the Monetary Policy Committee of the Bank of England as the official dealing rate, being the rate at which the Bank is willing to enter into transactions for providing short-term liquidity in the money markets or (b) where an order under s.19, Bank of England Act 1998 is in force, any equivalent rate determined by the Treasury under that section.

However, interest will not be paid in respect of periods where the claimant has not taken reasonable steps to pursue the claim or, where relevant, the application for rectification (r.195(3), LRR 2003).

Where the period specified under r.195(1), LRR 2003 starts before that date:

• for the part of the period before 10 November 2008, at the applicable rate or rates set for court judgement debts, and

• for the part of the period on or after 10 November 2008, at 1 per cent above the applicable Bank of England base rate or rates.

4.5 Claimants in person

While most claimants employ a solicitor or other legal representative to assist them in dealing with problems arising from a mistake in the register, others prefer to deal with the matter themselves. Provided the claimant has acted reasonably they will usually be able to be indemnified in respect of out-of-pocket costs and expenses. Full details will be required, together with receipts wherever possible. It is, therefore, advisable to keep a careful record of any expenses that may subsequently form part of a claim for indemnity.

A claimant who has not employed a legal representative will not be entitled to any ‘costs’ in respect of their own time, because these are not ‘costs or expenses incurred by the claimant in relation to the matter’ (paragraph 3(1) of Schedule 8, LRA 2002). However, they may be able to claim indemnity for any financial loss arising from the use of their own time in dealing with the mistake and/or the claim for indemnity.

The requirement for the registrar’s consent applies to any such claim for out-of-pocket costs and expenses and may apply to such a claim for financial loss. Therefore, a claimant intending to make such a claim should approach the registrar for consent as early as possible.

5 Other costs points

5.1 Non-rectification alterations

If the register is altered in a case not involving rectification, the registrar may still make a payment of indemnity in respect of any costs or expenses reasonably incurred in connection with the alteration. (See Practice Guide 39 – Rectification and indemnity for details of when a register may be altered and when that will amount to rectification.) The prior consent of the registrar is normally required except where it appears to the registrar that the costs or expenses had to be incurred urgently and it was not reasonably practicable to apply for the registrar’s consent (paragraph 9 of Schedule 4, LRA 2002).

5.2 Alterations to register of cautions against first registration

Where the registrar alters the register of cautions against first registration kept under s.19, for the purpose of correcting a mistake or bringing the register up to date, the registrar may pay such amount as they think fit in respect of any costs reasonably incurred by a person in connection with the alteration (s.21(3), LRA 2002).

5.3 Production of documents

Under r.201, LRR 2003, the registrar has the power, if requested to do so, to require someone who has a document in their possession (the ‘document holder’) to produce that document to the registrar. The registrar may require the person who has made the request to pay the reasonable costs incurred by the document holder in producing that document.

6 Enquiries and comments

If you have a particular concern that is not covered by this guide, please contact Land Registry in advance of the transaction – see Contact details. If you have any comments or suggestions about our guides, please send them to:

Central Operations Group
Land Registry
Trafalgar House
1 Bedford Park
Croydon
CR0 2AQ

(DX 8888 Croydon 3)

You can obtain further copies of this and all our guides free from Customer Support (see Contact details) or you can download them from our website at www.landregistry.gov.uk