Court rules Cornwall Park board wrong on ground rents

The Cornwall Park Trust Board is mulling appealing a court decision over a controversial leasehold property.

In the High Court at Auckland Justice Rebecca Ellis ruled it was wrong for the Cornwall Park Trust Board to try to charge a former leaseholder, Yong Xin Chen, back rent after she abandoned her home. 

Yong Xin Chen abandoned her property in 2011 after ground rents skyrocketed by 900%. Due to the leasehold arrangement she had bought the house, but not the land it sat on in 2005 for $450,000, a recent court judgment says.

Ms Chen argued that she was advised by her real estate agent the Board would allow her to buy the property freehold or outright but this never eventuated.

While the annual rent had been $8300 since 1988, the Board took court action for "upset" rent of $173,323 for the period between the expiry of the old lease and when she exited. It also claimed the costs of the repairs that the Board had to undertake on Ms Chen’s property and placed freezing orders on a separate property she owned as the case went through the courts. 

In interpreting the contract Justice Ellis said the parties to the lease could reasonably be expected to be aware that Glasgow leases have historically been contentious, especially for the rent review process.

“It is well-known, for example, that ground rental increases have on occasion been perceived as crippling by lessees.”

However, she also noted that it was a matter of public record that some Glasgow lessors in Auckland had historically had a policy of offering freeholding to lessees.

In any event, the present issue in Ms Chen’s case was novel, because of the Board’s actions.

She decided that a former lessee should not have to pay backdated rent that is higher than what other would have had to pay.

The judge said Ms Chen should not have to be liable for the rents during that time because the lease gives an expectation that a lessee can remain in possession of a property until an auction process has run its courts, and the fact that there was an unsuccessful auction indicates the upset rental was too high for the market.

She also said the Board has received the improvements for nothing and remained about to rent out the property.

Otherwise, the judge said the Board would get a “double windfall.” However Ms Chen must pay some rent, and the judge left it for another day to work out how much.

Remedial work claim
The Board did win its claim for costs of the remedial work it had to undergo on the property.

While Ms Chen argued that burglars must have gone in and removed the doors, stoves and vanity units that were missing, Justice Ellis said there was no evidence of a breakin.

“The only plausible explanation is that she arranged herself for these to be taken, prior to her departure.”

What next 
Ms Chen's lawyer Jennifer Wickes described the case as a "David v Golaith battle" and the ruling in favour of her client was the first time anyone has won anything against the Cornwall Park Trust Board. However she said her client could appeal the second ruling against in relation to repairs. 

The court case has been closely watched by leaseholders around Auckland's popular park, and Cornwall Park leaseholders association chairman Don Tilbrook says affected members will be looking at their options but it is too early to say, especially if it goes to a higher court. 

The Cornwall Park Trust Board has had many disputes with lessees whose rents help fund the maintenance of the park.

However it has proposed a "modern lease" and says a  “large number of lease renewals” were completed in early 2014.

vyoung@nbr.co.nz

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