Philipp Stampfer v Avon Ground Rents Ltd

This appeal concerned whether a landlord may recover, under a lease clause permitting deemed landlord's expenses for "the collection of rents from the Building", a separate fee for preparing and serving notices under section 166 of the Commonhold and Leasehold Reform Act 2002. The First-tier Tribunal held that service of a s.166 notice and associated work was part of "collecting the rent" and upheld a £30 + VAT half-yearly charge. The Upper Tribunal allowed an appeal, holding that giving a s.166 notice is a distinct, antecedent act which makes rent due but is not itself the collection of rent; the lease did not expressly or by necessary implication cover service of s.166 notices. The Court of Appeal dismissed the landlord's appeal, endorsing the UT's reasoning that serving a s.166 notice renders liability for rent into an actual liability but is a logically prior step to collection and so does not fall within the contractual phrase "the collection of rents from the Building".

Background and parties. The appellant, Avon Ground Rents Ltd, owned the freeholds of two blocks of flats. The respondent, Philipp Stampfer (and other leaseholders), held a long lease of a flat with a low ground rent (£250 p.a. initially) and service charge provisions. Avon began charging a £30 + VAT "Ground Rent Collection Fee" on half-yearly invoices from 1 July 2019. Several leaseholders, including Mr Stampfer, refused to pay the fee and applied to the First-tier Tribunal.

Nature of the application. The leaseholders brought proceedings in the First-tier Tribunal under the statutory jurisdiction over administration charges (Schedule 11 to the Commonhold and Leasehold Reform Act 2002). They contended the ground rent fee was not recoverable either because it was not within the lease terms or, alternatively, because it was unreasonable.

Key lease provisions and statutory background. The Lease reserved service charge liability by reference to Schedule 7. Schedule 7 paragraph 7-2.3.2.4 allowed a deemed landlord's expense where the landlord "attends ... to the collection of rents from the Building"; such deemed expenses were limited to reasonable sums and not to exceed what independent agents might charge. Section 166 of the 2002 Act requires a prescribed notice before a long leasehold tenant becomes liable to pay rent; the Landlord and Tenant (Notice of Rent) (England) Regulations 2004 prescribe form and information for such notices.

Procedural history and issues for this appeal. The FTT decided that preparation and service of s.166 notices formed part of "collection of rents" and that £30 + VAT was reasonable. The Upper Tribunal allowed the landlords' appeal on construction, holding that serving s.166 notices makes rent due but is not the same act as collecting it and that the lease did not expressly or implicitly cover such notices. The Court of Appeal heard a second appeal limited to the construction point. Permission to argue that the fee served a different package of work, and permission to challenge the reasonableness of the fee, were not permitted on appeal.

Court's reasoning and conclusion. The Court of Appeal agreed with the UT. It treated giving a s.166 notice as a distinct, antecedent act that turns a potential liability into an actual liability and therefore is not itself the collection of rent. The lack of an express lease provision authorising recovery of costs for s.166 notices (contrast was drawn with an express lease covenant as to s.146 notices) supported the conclusion that such notices were not covered by the phrase "collection of rents". The appeal was dismissed. The court noted it had not decided whether £30 + VAT would in any event have been reasonable if recoverable.

Appeal dismissed. The Court of Appeal held that serving a notice under section 166 of the Commonhold and Leasehold Reform Act 2002 is a distinct, antecedent act which makes rent payable but is not the same as "attending to the collection of rents"; the lease did not authorise recovery of a charge for preparing and serving s.166 notices under the clause for deemed landlord's expenses for collection of rents, so the charge could not be recovered under that head.

First-tier Tribunal (Property Chamber) decision dated 26 February 2021 (no neutral citation given) — appeal to the Upper Tribunal (Lands Chamber) allowed: [2022] UKUT 68 (LC) — further appeal to the Court of Appeal: [2022] EWCA Civ 1375 (this judgment).