Tenants Liable For Grossly Disproportionate Service Charge

The Supreme Court has refused to intervene to protect tenants from paying grossly disproportionate service charges.

A service charge payable by tenants to their landlord of chalets in a holiday park was drafted to increase at a compound rate of 10% per annum. This would have meant that by 2072 each tenant would be liable to pay a service charge of over £550,000 per annum!

The tenants said that this was grossly disproportionate and defied commercial commonsense. However, the Supreme Court disagreed. The clause was clear and unambiguous and the Court would not intervene to protect the tenants from a 'bad bargain'.

"The Court also confirmed that there is no principle that service charge clauses are to be construed restrictively" says Head of the Commercial Department and Lease specialist, Gillian Jones. "It is therefore essential that tenants obtain advice before signing up to onerous service charge provisions in what may otherwise be fairly attractive lease terms."

For more information on leases and service charge provisions contact Gillian Jones.


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