On renewal of a business lease under the Landlord and Tenant Act 1954 it is for the party arguing for a change from the current lease terms to justify the change, which must be fair and reasonable: see O’May v City of London Real Property Ltd [1983] 2 AC 726.
The Newcastle County Court has considered this principle in Kwik-Fit Properties Ltd v Resham Ltd [2024] EWCC 4.
The claim concerned land and buildings on an out-of-town industrial estate in Washington, Tyne and Wear, of which Resham was the freehold owner. Kwik-Fit occupied the premises for car repair and fitting services under a 25-year lease granted in 1996.
The term expired on 8 April 2021 but the lease continued under section 24(1) of the 1954 Act. The initial rent under the lease was £35,000 per annum, with five-yearly upward-only rent reviews, but no reviews had been implemented.
The grant of a new 15-year lease was agreed but the parties could not agree on whether there should be a tenant’s break clause exercisable every five years; whether the tenant’s contribution to maintenance of an access way should be capped; and the annual rent payable.
(i) Kwik-Fit sought a break clause to provide flexibility in view of ongoing operational changes in its business, claiming that its policy was to take short leases or leases with five-year breaks for this reason. There was little evidence of such a policy. Of 80 lease renewals negotiated by Kwik-Fit after March 2017, 48 did not have five-year breaks. There was also no evidence that agreeing leases with five-year breaks was market practice in the quick-fit car maintenance industry generally. Conversely, there was evidence that a tenant’s break clause would have a negative impact on the landlord’s reversion. It was therefore not fair and reasonable to include a tenant’s break clause.
(ii) The existing lease provided for Kwik-Fit to pay 33.3% of the reasonable and proper cost of the maintenance, lighting and cleaning of the access way to the public highway but provided for Resham to apply another percentage if it considered it fair and reasonable to do so. The court refused to cap this liability as the charge could go down as well as up.
(iii) The landlord sought a rent of £46,250; the tenant a rent of £27,400. The court was satisfied that the landlord did not trigger rent reviews because a higher rent would not be achieved or the position was uncertain. The court gave greater weight to comparables relating to quick-fit premises and recent lettings in fixing the annual rent at £39,300.
Louise Clark is a property law consultant and mediator
