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Archive for June, 2015

But that’s not fair!

As service charges are a constant source of dispute between landlord and tenant one would think that before signing a lease parties would check the wording and effect of the relevant clause with care.  However, in the Supreme Court case of Arnold v Britton and others [2015] UKSC 36 it appears unambiguous wording enabling the lanldord to obtain an annual compound increase in the charge at a rate of 10% only came to the tenants’ attention when it became apparent that the collected sums far exceeded the cost of the services provided.

No claim for rectification or mistake was made - the tenants of the relevant residential chalets merely claimed the sums demanded by the landlord to be unfair.  Mr Justice Morgan in his High Court judgement said that if parties adopt a fixed percentage increase, ‘they are bound by the consequences’.  The Court of Appeal agreed.  Giving judgement, Lord Justice Davis said that he was well aware that a payment of over £3,000 per annum for relatively limited services with potential compounded increases thereafter, ‘is not at all attractice’ but ‘it is the result of the bargain made and the court cannot properly, under the guise of a process of interpretation, introduce new and other terms to mend a bad bargain’.

The tenants appealed to the Supreme Court no doubt at considerable financial cost.  Four of the five Lords of Appeal (Lord Carnwath dissenting), whilst expressing some sympathy for the tenants, dismissed the appeal.  Lord Neuberger, President of the Supreme Court, recognised that there was a case for extending the various statutory protections given to residential tenants in respect of service charges to cover cases where a landlord can make a substantial profit from the service charge but held ‘that is a policy issue for Parliament; and there may be arguments either way’.

If you wish to hear more about service charges, contract Hatherleigh Training.