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The case of Avon Ground Rents Ltd v Cowley and Others [2019] EWCA Civ 1827 deals with an action for ground rent with a service charge provision in leases featuring rival interpretation and enforcement.

Avon Ground Rents Ltd v Cowley and Others [2019] EWCA Civ 1827

Summary

The case of Avon Ground Rents Ltd v Cowley and Others [2019] EWCA Civ 1827 deals with an action for ground rent with a service charge provision in leases featuring rival interpretation and enforcement. It thus fell to be decided by the Court of Appeal how the provisions of the lease should be applied, and what may be considered reasonable for the parties to expect of each other.

Facts

Avon Ground Rents Ltd (Avon) owned the freehold of a residential property in which Mr Cowley and other lessees (the Respondents) held long leases. The lessees were under obligation by the leases to pay ground rents and service charges for the repair and management of the premises. Over time, there were disputes as to the quantum and the method of calculation of those charges.

The lessees challenged the validity of Avon's demand for service charge and its reasonableness. Their claim was more on the fact that they were excessive besides being improperly calculated in respect of tenancy lease. He asked the tribunal to determine his relief challenging the enforceability of those charges and solace seeking a fair assessment.

Issues

From the case, the main issues that cropped up for determination were:

1. Whether Avon's ground rents and service charges were contrary to the terms of the lease;

2. Whether such charges were reasonable and recoverable under s.19 of the Landlord and Tenant Act 1927;

3. Meaning of the express terms in the lease upon calculating and apportioning such charges"

First Instance

The lessees challenged these charges before the First-tier Tribunal Property Chamber as excessive and improperly calculated amounts. The tribunal had to take into account the terms of the lease and all evidence brought before both parties to it, including expert evidence of the reasonableness of such charges.

The Tribunal made sundry rulings which were most advantageous to the lessees and cut down, by a huge quantum, the amount Avon was claiming. It declared some of the charges not in conformity with the terms of lease, some were unreasonable; that when calculating such charges, there should be transparency and adherence to provisions of lease.

Decision on Appeal

Avon appealed to the Upper Tribunal (Lands Chamber) which dismissed an appeal and Avon further appealed to the Court of Appeal. The question upon this appeal was whether the lower tribunals had interpreted the lease terms correctly and whether their conclusions as to the reasonableness of the charges flowed properly thereto.

The Court of Appeal, though careful with respect to available evidence on lease-to-lease agreements and decisions by tribunals below, has stated grounds for dismissing Avon's appeal because the judgment agreed with the First-tier and Upper Tribunals—charges Avon was demanding were not wholly compliant with the terms of the lease and in some instances excessive.

The Court of Appeal, in this case, essentially reaffirmed the principles relating to reasonableness and transparency applicable when service charges and ground rents are to be charged. It thus made clear that clear and cogent evidence of the charges the lessor is going to want to charge on the lessee must be obtained, whereby such charges must constitute actual and reasonable expenses.

Comments

The decision in Avon Ground Rents Ltd v Cowley and Others is far-reaching for a variety of reasons:

1. Reaffirmation of Reasonableness: This judgment once again underlined the fact that a requirement of reasonableness must be associated—with overarching consideration—the calculation and recovery of ground rents and service charges; at all costs, landlords must see that such charges be reasonable, express, and representative of actual spending.

2. Need to Adhere to the Terms of a Lease: Thereafter, from this case, full compliance to adhere to the terms of the lease has been stressed upon both the lessor and lessee; at all times, they must be conscious and mindful with the provisions under the lease wherein charges must be computed based on these premises.

3. Role of Tribunals: It still maintains the function to be performed by the First-tier Tribunal and on appeal, Upper Tribunal, to scrutinise and adjudicate disputes about service charges and ground rents squarely bringing it on the board endowed with powers to consider afresh the evidence, if necessary, and to make adjustment in the charges in the cases found not to be reasonable. This shall be the most important mechanism guaranteed for protection of the rights of lessees.

4. Precedent for Future Disputes: This case provides a useful precedent in regard to guiding what lease terms mean and what type of evidential material is needed to support reasonableness in all future disputes before the tribunal that adjudicates on ground rents and service charges.

5. Balancing of Rights and Obligations: By the judgment, the rights of the lessor to recover only the legitimate costs have been balanced against protection of the lessee against unreasonable and unjustified charges. More particularly, principles of fairness and transparency with accountability in administration of residential leases have been reiterated by the judgment.

The judgment of Avon Ground Rents Ltd v Cowley and Others [2019] EWCA Civ 1827 is very fundamental in setting out the statutory framework under different provisions that deal with ground rents and service charges of residential leases. The ruling elaborated that charges had to be very express, reasonable, and most documented to protect the rights and obligations of the parties to the contract.

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