Oxwich Leisure Park has one of the chalet communities of the Gower Peninsula in South Wales, and they had the result of their appeal to the Supreme Court yesterday and unfortunately it was bad news. Their service charges will continue to increase by 10% a year, and whereas currently they pay £3000, by the time the leases expire they will each need to pay over £1,000,000 every year. On hearing the outcome, residents were describing their chalets as now worthless.
The court sympathised with the residents but upheld their annual service charge contracts which were signed in 1974. These contracts agreed to an increase of 10% per year, when inflation was 16% and when 10% looked attractive. However, the various measures of inflation have been much less for almost all of the intervening years and in 2015 the CPI measure of the cost of living is actually falling. Against that background, 10% per year leads to eye watering increases: £90 per year in 1974 has now become £3000 and will be £1,025,004 each by the end of the leases in 2073.
Despite the harshness of their situation, the judges observed that signing a fixed rate of increase amounted to placing a bet about inflation which could equally well have benefitted the tenants rather than the landowner if things had been different. Nevertheless, there is the possibility of a better outcome, as the landowner repeated her offer to renegotiate the terms of the contract in the tenants’ favour.
The Gower Peninsula has several “chalet field” communities, and the Oxwich chalets appear to be quite modern in style and (re)built in brick rather than the wooden huts I’ve blogged about elsewhere and that are well represented on other Gower sites which I’m planning to blog about in the future.