Lease solicitors Coles Miller are warning flat owners and other leaseholders to check their legal documents after an important Court of Appeal ruling over service charges.
Three Lord Justices at the Court of Appeal unanimously ruled against tenants who are disputing a service change that will rise to more than £1 million per year for each of their properties.
In the case - Arnold v Britton and Others (2013 EWCA Civ 902) - the tenants appealed against the service charge which was fixed in 1974 at £90 with an increase of 10 per cent per year.
Compounded over the length of the 99-year lease, the service change will rise to more than £1 million for each tenant.
Under English law, tenants may appeal against a large increase in a variable service change if it is deemed to be unreasonable.
But the three Lord Justices all agreed that the clause at the centre of the dispute related to a fixed charge and that the landlord’s interpretation of it had been correct.
Delivering the lead judgment, Lord Justice Davis said: “The court cannot properly, under the guise of a process of interpretation, introduce new and other terms to mend a bad bargain: which is in reality what the court is being asked to do.”
Coles Miller Partner Andrew Howard, head of the firm’s Residential Leasehold Property department, said: “This case illustrates how important it is for people to read the lease.
“I can understand people seeing a 25-page legal document and being put off by it. They should take expert legal advice from a solicitor specialising in leasehold property.
“You need to instruct a reputable firm that will check things out for you. You should also read the lease for yourself and if you have any questions you should check with your solicitor,” he added.
Dorset-based Coles Miller is seeing an increase in work related to residential leasehold property due to the upturn in the housing market.
Some leaseholders are trying to put their flats on the market only to discover that the leases are too short for buyers who cannot obtain a mortgage on the property.
Sixty years is the effective cut-off point - forcing the vendors to look at ways of extending the lease.
That could involve either a lease extension or buying the freehold.
Every year that the lease falls below 80 years makes this more expensive because the tenants buying the freehold have to compensate the freeholder for the marriage value of the property.
Other services offered by Coles Miller’s Residential Leasehold Property include advising on the:
- right to manage - leaseholders have a right to take over the management of their property from the landlord
- right to first refusal - landlords selling their freehold or head lease must first offer it to the leaseholders
- right to vary a lease - leaseholders can apply to the Leasehold Valuation Tribunal if a lease does not make satisfactory provision for matters such as repair, maintenance or insurance and one party does not agree to the changes
- enforcement of covenants - resolving disputes and ensuring that the leaseholders keep to the rules.
For further information about residential leasehold property, please contact Coles Miller Solicitors Partner Andrew Howard, 01202 293226.