Construction of provisions — Valuation — 50% of increase in under-rents payable in excess of apportioned basic annual rent — Whether to compare level of under-rents with apportioned basic annual rent – Contention for landlord upheld
By clause 1 of a lease, six separate sets of premises used for warehousing in Caxton Road, Bedford, were demised for a period of 99 years from April 1976. The lease resulted from a sale and leaseback transaction between the original lessors, the plaintiff’s predecessors in title, and the defendants who were the original lessees. It provided for a basic annual rent and an additional rent which was payable “from each relevant date until the next relevant date … a sum … equal to 50 per cent of the increase in the under-rents payable or deemed to be payable on each relevant date in excess of the apportioned basic annual rent (or the aggregate of the relevant parts) as set out in paragraph 1(4) of this Schedule …”. At the date of the lease, two units were unlet while the other four units were let.
There had been a review of the rent since the granting of the lease with the original lessors in which the agreed increase represented half the under-rents actually passing. At the next relevant review date, by which time the present plaintiff was the lessor, the parties were unable to agree the additional rent payable.
The plaintiff contended that the rent review clause was to be construed so that, at each relevant date, there was added to the part of the basic annual rent apportioned to each of the units, the difference between the figure to which the relevant under-rent had been increased and the apportioned basic annual rent ie that there was an intention to compare the level of under-rents with the apportioned basic annual rent. The defendants, on the other hand, submitted that it had been the intention of the parties to set the rent at half the passing under-rents.
Held Landlord’s contention upheld.
1. If the contention of the defendants had been correct, it would have been extremely simple so to provide and there would have been no necessity to draw up a complicated provision to carry the intention into effect. The defendants’ construction required a special meaning to be given to the words “the increase in the underrents” which neither the paragraph in question, the other provisions, nor the lease itself, justified.
2. The contention for the landlord, however, did little if any violence to the words used. The effect of the words was tolerably plain and it was the effect for which the landlord contended.
John Furber (instructed by Nabarro Nathanson) appeared for the plaintiff landlord, WGTC Nominees Ltd; and Michael Rich QC (instructed by Wood Nash & Kimber) appeared for for the defendant tenants, Hamilton Installations Ltd.
