Rent review provision in lease — Nomination of valuer to determine revised rent — Whether lease imposing upon landlords obligation to apply for appointment of expert valuer to determine revised rent
In an underlease dated March 31 1988 the defendant lessors, the landlords, demised to the plaintiff tenants warehouse premises at Unit B, 50 Brewery Road, Islington, for a term of 20 years from December 25 1987 at an initial rent of £50,000 pa with successive five-year rent reviews, the review dates falling on the fifth, 10th and 15th anniversaries of the commencement of the term. Schedule 4 of the agreement contained details of how the reviewed rent was to be calculated and para 1 provided, inter alia, that: “the revised rent may be agreed between the landlord and the tenant or in the absence of agreement determined by a specialist valuer…such valuer to be agreed between the parties or nominated by the President of the RICS upon application of the landlord made at any time after the commencement of the relevant rental period…”.
The tenant, in anticipation that in the current market a valuer would be likely to fix the rent at a figure less that the initial rent, sought to initiate a rent review but the landlords declined to agree an expert valuer or apply to the president of the RCIS to nominate such a valuer under the provisions of para 1 of schedule 4. The tenants sought a declaration that on the true construction of the underlease the landlords were bound to apply to the president of the RCIS to nominate such a valuer and contended that the provision was a substantive provision of the lease and not mere machinery. The judge granted the relief sought and imposed a mandatory injunction. The landlords appealed.
Held The appeal was dismissed.
The landlords had no option to oppose a rent review and were obliged by the terms of the underlease, on their true construction, to apply for the nomination of a valuer to carry out the review.
Even though it appeared that the draftsman of the agreement in 1987 had not taken into account the possibility that rental values might fall, the rent review provisions were not to be construed as having an upward-only effect. A valuer could fix a lower rent from that which had pertained during the previous rental period and in those circumstances a landlord might well be reluctant to initiate any review. However, he could not choose to frustrate the rent review. The court could impose terms if necessary to give business efficacy to the agreement where, as here, the provisions for fixing a revised rent had broken down. The court would provide the mechanism to determine what was the proper level of revised rent for the premises, either by directing an inquiry, or by implying the necessary terms.
Kim Lewison QC and Janet Bignall (instructed by John Summers & Co) appeared for the appellants; Robert Powell-Jones (instructed by Stephenson Harwood) appeared for the respondents.
