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The Supreme Court has rejected an appeal by 25 chalet tenants against the strict interpretation of the service charge provisions in their 99 year leases.
The leases provide for the tenants to pay a fixed £90 service charge in the first year of the term, to be compounded annually by 10%. Although this means that, for a lease granted in 1980, the tenant will be paying over £550,000 by 2072 for limited services, the court held that this was not a reason to depart from the natural meaning of the clause and that it was not the court’s job to relieve a party from the consequences of his imprudence.
When most of the leases were granted (in the 1970s and 80s), inflation was running at over 10%. However, this case shows the importance of drafting leases to cater as far as possible against unexpected eventualities (in this case, the significant decrease in the inflation rate).
One of the requirements for tenants to contract out of the security of tenure regime contained in the Landlord and Tenant Act 1954 is that they make a simple or statutory declaration before entering into the lease.
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Landlords should reconsider summary judgment if a Part 26A restructuring plan is pending.
A landlord’s claim for summary judgment to recover rent and service charge arrears accrued since the start of the pandemic against a non-essential retailer succeeded. Like London buses, a second such case has followed hot on its heels.
Whilst this decision may not be surprising, it will undoubtedly send a chill down the spine of retailers in a similar position to The Fragrance Shop.
Partner and Head of Real Estate
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