The importance of ensuring that lease provisions are correctly drafted was recently highlighted by the Supreme Court decision in Arnold v Britton, discusses commercial property partner Nigel Whittaker.
This case related to a number of holiday chalets at Oxwich Leisure Park in Wales which had been let on long leases. There were several versions of the service charge provisions within the various leases but, essentially, each one placed an obligation on the tenant to pay a service charge “in the sum of Ninety Pounds and Value Added Tax (if any) for the first year of the term hereby granted increasing thereafter by Ten Pounds per Hundred for every subsequent year”.
The landlord, Arnold, took the view that the service charge was therefore a fixed sum which would increase at a compound rate of 10% in each year, and this would mean that by 2072 each tenant would have to pay a service charge in excess of £500,000 each year irrespective of what services were actually provided!
The Supreme Court held that Arnold was correct and stated that when interpreting a written contract the court should focus on the facts and circumstances known by the parties at the time the document was executed and the natural and ordinary meaning of the wording. If the words are clear then it would be very difficult for a court to justify departing from them, even if to do so would bring about commercial common sense and assist a party who had made a bad bargain. It is for the court to identify what the parties have agreed and not what the court thinks they should have agreed.
This has, unfortunately, resulted in alarming and financially disastrous consequences for the tenants of these chalets but reinforces the importance of carefully checking the wording of a lease.
Commercial property lead partner, Nigel Whittaker is a “highly regarded property specialist” who acts for a diverse range of business and charity clients as well as investors on the acquisition and disposal of high value commercial premises.
Commercial property solicitor Emma Thompson answers some key pandemic-related questions for landlords and tenants in the commercial sphere. I am a tenant, do I have to pay my rent? If…
From 1 September 2020, the categories under the Town and Country Planning (Use Classes Order) 1987 are changing to create two new use classes. It is hoped that the overhaul…
As you will be aware from some of our previous updates, a number of measures have been put in place to give businesses the breathing space and tools they need…
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL cookies.
This website uses cookies to improve your experience while you navigate through our website. Out of these cookies, the cookies that are categorised as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyse and understand how you use our website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies but it may affect your browsing experience on our website. You can find our cookie policy here.
Necessary cookies are absolutely essential for our website to function and enable core functionality such as security and accessibility. These cookies do not store any personal information. You can block these cookies by changing your browser settings, but this may affect how the website functions.
We use performance cookies such as Google Analytics to help us count the number of visitors and to see how visitors move around our website when they are using it. This helps us to improve the way our website works, for example, by ensuring that users are finding what they are looking for easily. The cookies collect information in a way that does not directly identify anyone. For more information on how these cookies work, please see our cookie policy.
