Landlord can’t recover cost of serving ground rent notice

The Court of Appeal has ruled that a landlord’s costs of preparing and serving a notice requiring payment of ground rent could not be recovered from the tenant as part of an administration charge.

Natalie Tatton Solicitor in our dispute team provides an update.

The case involved Avon Ground Rents Ltd and Philipp Stampfer

Avon held the freehold to two blocks of flats. The tenant, Mr Stampfer, held a long lease of one of the flats. 

The lease required that he pay annual ground rent in half-yearly instalments of £125. It also obliged him to pay an administration charge, which covered certain deemed expenses set out in Sch.7 of the lease. 

Those deemed expenses included costs incurred in “the collection of rents”. The landlord could charge the tenant for such expenses so long as they represented “a reasonable fee not exceeding that which independent agents might properly have charged for the same work”.

To comply with the Commonhold and Leasehold Reform Act 2002 s.166, the landlord had to serve a notice requiring payment of each instalment of the ground rent in order to render it due. 

Avon added, as part of the administration charge, a “ground rent collection fee” of £30 plus VAT to the half-yearly ground rent instalments to cover the cost of preparing and serving two s.166 notices per year. 

The Upper Tribunal held that it was not entitled to do so, rejecting its argument that preparing a notice was a cost associated with the “collection” of the ground rent.

The Court of Appeal upheld that decision.

It noted that rent could not be collected until it was due. The effect of giving the notice was therefore to make payment due. 

However, although both making the rent due and collecting the rent were part of the means by which the landlord got its rents, they were in principle different stages. 

While giving the notice was a prerequisite to the collection of rent, it was not itself the collection of rent.

For more information about this article or any aspect of commercial property law please contact Natalie on 01228 516666 or click here to send her an email.