Leasehold battle heads to High Court today

Yong Xin Chen forfeited this $2.1 million bungalow at 21 Maungakiekie Ave after her annual ground rent rose from $8300 to $73,750. Photo / Greg Bowker

The high-profile case against the owner of a $2.1 million Auckland house who abandoned her property after leasehold payments skyrocketed from $8300 annually to $73,750 begins in the High Court at Auckland this morning at 10am.

In 2005, Yong Xin Chen bought the big bungalow at 21 Maungakiekie Ave, on the edge of Cornwall Park, for $450,000. But the 1297sq m site is owned by the Cornwall Park Trust Board, which charges residents ground rents, so she owned only the house but not the land.

She bought knowing she had to pay ground rent. But just three years later, the board wrote to tell her the rent was rising in accordance with the terms of the lease, which has a 21-year review period.

It said that based on the property's valuation, the ground rent would rise from $8300 a year to $73,750 from March 2009.

She baulked at that huge increase and eventually left the house, but now the board is chasing her for $348,284 in unpaid leasehold fees, renovation costs and expenses.

The board spent $164,404 alone on repairs to reinstate and rent the house, which valuers estimated was worth only $375,000. However, the house stands on a highly valuable section, hence the much higher overall property valuation.

Like some other houses on leasehold land in the area, the board has now been forced to tenant it. An auction in September 2011 failed to draw a single buyer.

The case is being watched closely by owners of 110 leasehold properties around the foot of One Tree Hill who this year have had two meetings with the board in an attempt to agree to new lease terms.

The board emerged the victor from protracted legal proceedings which went all the way to the Supreme Court. There, it won against a group of about 70 disgruntled lessees who first went to the High Court to the Court of Appeal, challenging the way land was valued and seeking a different method.

The board argued successfully that the value of the land should be based on the highest and best use of a property, unconstrained by any development.

Today, Queen's Counsel Matt Casey, is appearing for the board beside John Hannan while Jenny Wicks appears for Yong.