© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Ninety-one chalets at a South Wales holiday park were let on 99-year leases, the terms of which were broadly similar across the park and each with a start date of 25 December 1974.
Under the leases, the landlord was required to provide maintenance services such as the mowing of grass and removal of refuse on payment of a service charge by the tenants. For the first year in each lease, the service charge was £90; in the first 70 leases granted at the park, this sum could be increased by 10% every three years. For the remaining 21 leases, the sum of £90 could be increased by 10% every year.
The tenants under the final 21 leases brought the claim, arguing that it cannot have been the intention to raise the service charge by such a significant amount; in 2015, the service charge would be calculated at £2,500 with the sum rising to £550,000 in 2072, the final year of the term.
The Court was asked to interpret a written contract. The parties’ intentions must be interpreted as “what a reasonable person, having all the background knowledge which would have been available to the parties, would have understood them to be using the language in the contract”.
The actual language used in the leases proved to be crucial; the fact that the consequences may be severe was not sufficient to depart from the strict interpretation of the unambiguous wording.
The Supreme Court held in favour of the landlord and disregarded the tenants’ appeal. The clear drafting of the clauses meant that there could be no doubt as to the parties’ intentions when entering into the leases, although commercial common sense must always remain a factor. That said, the judgment refers to the fact that, when the 21 leases were entered into, inflation was running at higher than 10% in any event.
One judge, Lord Carnwath, disagreed with the decision and held that the 10% figure should be interpreted as a ceiling increase as, otherwise, the service charge becomes unacceptably unfair on the tenant.
This case is of great significance in terms of lease interpretation; the judgment means that commercial considerations will not override the strict interpretation of parties’ intentions where lease wording is clear, even where the consequences may prove exceptionally costly for one party.
Tenants must be sure that, when entering into a lease, they understand thoroughly the long-term implications of their service charge clauses.
Phil Parkinson is Associate Director at J B Leitch Solicitors