Do the costs of collecting ground rent include the costs of serving the necessary notice ? No, says the UT(LC) in Stampfer v Avon Ground Rents Ltd

09 March 2022

Not content with exercising its power to regulate the reasonableness of administrative charges mandated by the express terms of leases, the Upper Tribunal has ruled that an entitlement to recover the costs of collecting ground rents does not (or did not on the true construction of the lease in question) include the costs of serving a notice in the form required by s. 166 CLRA 2002 so as to render those grounds rent collectable.

Its ground for that conclusion? You cannot collect a debt which has not become due, hence the costs of making it collectable are not the costs of collecting it … Hmm.

The decision follows  the courts and tribunals' marked tendency towards narrowly constructing landlords’ contractual rights to recover costs from lessees. See Escalus Properties Ltd v Robinson [1996] QB 231 and Contracteal v Davies [2001] EWCA Civ 928 amongst others.

However, it is also remarkable that those drafting leases do not use more comprehensive terminology to define the costs which a landlord is entitled to recover from individual lessees, as opposed to its lessees generally by way of service charge.

No such reticence afflicts those drafting mortgages, for instance, so it surely cannot be beyond the wit of a creative conveyancer to use words in this context which even the most creative judge is unable to ignore. The fact that relatively few leases, even modern ones (as this was) do make such provision suggests that landlords are happy, or content at least, to spread the costs of recovery to the detriment of compliant lessees.

Read the judgment in full in Stampfer v Avon Ground Rents Ltd [2022] UKUT 68 (LC).