The recent Supreme Court decision of Arnold v Britton and others [2015] UKSC 36 re-affirmed the Court of Appeal’s decision with regards to the interpretation of service charge provisions in Leases.

The Lease in question concerned a 99 year term. The first part of the service charge clause required the tenant to pay an annual charge to reimburse the landlord for providing services and the second part of the service charge clause provided that the service charge would be subject to a 10% annual increase in each year of the term. The net effect of which meant that the service charges payable under the Lease could be £550,000.00 per annum by the end of the term.

The Supreme Court reaffirmed the decision of the Court of Appeal that where the natural meaning of the language is clear, even if the result is heavily detrimental to a party, it is not the Court’s place to step in and save a party from a bad bargain.

Any argument put before the Court to suggest that there should be special rules of interpretation applying to the construction of service charge clauses to construe them restrictively was rejected. The Court did not recognise any unique principle of interpretation here.

This decision reinforces the need for parties entering into the Lease to ensure that they take specialist advice and are clear on the terms of the Lease well before they sign them.

If you have any questions regarding this article or require further information on the decision of Arnold v Britton and others [2015] UKSC 36 or assistance with commercial property matters generally, please do not hesitate to contact Stuart Mullins.