Holiday homers lose £1m rent case

Holiday homes owners face paying more than a £1 million a year in rents and charges to their landlord after signing up for a fixed rate annual increase on 99-year leases.

Nearly 100 property investors signed up for £90 a year leases in 1974 – but failed to realise the small print of their contract let the landlord increase the rent by 10% a year for 99 years.

Now, 25 of the owners have challenged the contract in court, but the judge ruled the lease is valid for the chalets with sea views at Oxwich Leisure Park on the Gower Peninsular, South Wales.

The owners claim the contract and the court decision has rendered their investments worthless as no local estate agent will even consider placing one of the homes on the market.

Mr Justice Morgan rejected their arguments that the rent rises were unreasonable and that they would not have bought the properties if they had properly understood the terms of the lease.

“In any case, the figure calculated for the 99th year of the term appears so high because that year is still a long way away and one is inclined to assume that inflation will not apply at 10% per annum for all of that time,” said the judge.

“That shows that the lessees made a bad bargain when they allowed for a 10% per annum inflation adjustment, but that is what they did.

“If the parties do adopt a fixed percentage increase to provide for future inflation, their choice may turn out to over-provide or under-provide for inflation. But if that is what they done, then they are bound by the consequences.

“The landlord is not free to disregard the percentage because it turns out to be inadequate. The tenant is not free to disregard the fixed percentage because it turns out to be too high.”

When the leases were signed, inflation was running at 16% and a 10% annual increase looked a bargain.

The 25 chalet owners challenging the terms of the lease are considering an appeal.

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