A recent Supreme Court case demonstrates that a party cannot rely on the courts to step in and rescue it from the detrimental consequences of a clear written clause in a lease of a holiday home. In the case of Arnold v Britton and others (2015) the Supreme Court upheld the clause in a lease of a holiday home which had a disastrous effect on the tenants of 25 leases at Oxwich Leisure Park.
The service charge provisions required the tenants to pay a fixed annual sum of £90 which would then increase at a compound rate of 10% every year (or for some leases every three years). On this calculation and assuming the leases were granted in 1980, the service charge would be over £550,000 by 2072. The landlord argued that the language of the clause was reasonable as, at the time the lease was granted annual inflation was running higher than 10%. The tenants’ argument was that the service charge would be so absurdly high in the later years of each lease that the landlord’s interpretation must be incorrect.
Despite the tenants’ protestations the Supreme Court concluded it was not for the court to re-write a clause where the natural meaning is clear and unambiguous. This case reiterates just how important it is to carefully consider the effect of every clause in any written contract, particularly as the court will only take into account whether the clause was reasonable at the time the contract was made and not whether it still makes commercial sense retrospectively. The court will consider what has been agreed between the parties and not what the court thinks that they should have agreed.
Whilst tenants of residential dwellings are protected by the Landlord and Tenant Act 1985 in relation to service charge, it is likely a court will adopt the above approach in relation to commercial property.
Steven acts for a range of clients from sole traders to large corporates on all commercial property matters, including acting for commercial landlords and tenants on the grant, assignment and surrender of short and long term leases along with many other areas of commercial property work.