New tenancy applications — Terms — Tenancies determined by notice — Markets owned by local authority — Representative sample of stall holders making application on behalf of all others — Court asked to fix open market and interim rents — Comparables to be taken into account — Council owning sole right to conduct markets within area — Exploitation of right — Analysis of other evidence — New rents determined in light of enumerated factors
The four applicants were tenants of market stalls in tow large covered markets built and owned by Sheffield City Council. Their tenancies were determined on, it was agreed, March 24 1986, by notice sent pursuant to section 25 of the Landlord and Tenant Act 1954. At the same time over 380 similar tenancies were also determined and the four applicants were selected by agreement between the tenants and the council as “sample” applications for the grant of new tenancies under the Landlord and Tenant Act 1954, Part II. The four applicants were from four differing parts of the markets. Each was intended to be representative of the general run of stalls in the various parts of the markets. The High Court was asked to determine the proper amount of rent payable for each of the four stalls with the intent that from those determinations appropriate figures for new rents under teh 1954 Act could be worked out without the remaining 380 applications each having to come before the court for determination. The parties’ agreement and evidence were made notwithstanding that the actual attractiveness of a particular stall within each section varied according to its position in the section and that the permitted trade to be carried on at a particular stall would carry a differing level of profitability.
Held The applications were granted.
1. The open market rentals were decided at between £7,064 and £13,990 pa. The interim rents were fixed at between £5,305 and £5,599 pa. In so deciding the court took into account the following factors:
2. The new tenancies to be granted to the applicants under the section 25 notices were to be quarterly tenancies determinable by the landlord on six months’ notice but in addition a review of rents payable under the new tenancies would not be made until three years from the date of grant of each new tenancy. It seemed that a much more accurate description in law of such a tenancy would be the grant to each tenant of a three-year term with a proviso enabling the tenant to determine the tenancy by a quarter’s notice. As a matter of experience the rent commanded by the grant of a three-year term was greater than the rent commanded by a quarterly tenancy; that remained the fact even when the so-called quarterly tenancy could not be determined by the landlord on less than two quarters’ notice.
3. A further difficulty in obtaining useful evidence upon which to base the determination of rent was the fact that many, probably most, of the existing tenancies in the markets were assignable, and all four of the applicants before the court held tenancies which permitted assignment. However, more recently the council had changed the form of their standard tenancy agreement to include in new lettings an absolute prohibition against assignment: Rent commanded by the grant of a tenancy with the right to assign would be greater than the rent on the grant of a non-assignable tenancy and that made evidence as to levels of rent payable on the grant of new tenancies by the council substantially less reliable as a comparable from which to assess the rent for the four tenants in question.
4. The council were the owners of an item of incorporeal property which they acquired by purchase. That right was recognised by the law as entitling the council to the sole right to conduct markets within the defined area. There was no reason why that property right should not be fully exploited by the council. The general law imposed no duty on an owner of property (and a market franchise was obviously property) to do other than deal honestly with those who wished to use that property.
5. The supply of stalls was not to be assumed to be large and each stall had to be considered in the context that most other stalls were already let.
6. The tender evidence before the court was of very limited value and the court merely had it in the back of its mind in trying to assess the figures. Both valuers were correct in regarding the tendered rents available as evidence as a very unsatisfactory basis on which to reach a figure for the true open market rent. In putting in a bid on a tender the person making the bid had to consider: “What are the premises worth to me?”. If, for some reason, the person making the bid had a particular desire or need for those premises he might bid well above the true open market price so as to be sure of a good chance of obtaining the premises.
7. Finally, no assessment should be based simply on a belief in future inflation.
Keith Rowley (instructed by Dibb Lupton Broomhead, of Sheffield) appeared for the applicants; and David Neuberger QC and Martin Rodger (instructed by the solicitor to the council) appeared for the local authority.