Option to renew lease for a further term — Rent to be agreed but subject to maximum equivalent to rent reserved in existing term — Whether option void for uncertainty — Whether rent “to be agreed” void for uncertainty — Landlord’s appeal dismissed
The respondents are the trustees of Prestatyn Golf Club and are the lessees under two leases granted by the appellants’ predecessors. The leases were granted in 1967, one for a term of 99 years at an annual rent of £10 for the site of the club-house, and the second for a term of 21 years at an annual rent of £1,150 (without provision for a rent review) for the land now laid out as the golf course. The 21-year lease contains an option in favour of the respondent tenants to request a new lease for a further term of 21 years “at a rental to be then agreed (but such rental shall not in any event exceed the rental hereby reserved)”.
The respondents claimed to have exercised the option in June 1985, stating that they were “willing to pay rent at a yearly rate of £1,150 under the terms of the new lease”. His Honour the late Judge Fitzhugh (sitting as a High Court Judge of the Chancery Division) (March 31 1988) ordered that the option had been validly exercised. The appellants appealed, submitting that the covenant or option to renew the lease was void for uncertainty by reason of its providing for a rent “to be agreed”. There was no provision as to what was to happen if the parties failed to agree such rent and the late judge had erred in holding that a term should be implied into the covenant as to the determination of the rent without having found any facts to support that holding.
Held The appeal was dismissed.
The option clause must be construed in accordance with the approach of the House of Lords in Hillas & Co v Arcos [1932] 147 LT 503: it must be construed in the context of the entire transaction of which the 21-year lease was part, and the court should, if it could, “so balance matters that without violation of essential principles the dealings of men may as far as possible be treated as effective”. The contractual intention of the parties is clear that, upon proper notice being given, the appellants should be under an obligation to grant a new lease at a fair rent to be agreed between the parties, that fair rent not to be in excess of £1,150: it is just and necessary to imply the provision for the rent to be fair.
The provision in the option clause for the maximum rent permitted the case of King’s Motors (Oxford) Ltd v Lax [1970] 1 WLR 426 to be distinguished. There was no reason, so far as voidness for uncertainty was concerned, why different principles should be applicable to the construction of a rent review clause in an existing lease as contrasted with an option for a new lease in an existing lease: see Beer v Bowden [1981] 1 WLR 522.
Nicholas Orr (instructed by the solicitor to Rhuddlan Borough Council) appeared for the appellants; and William George (instructed by Clement Jones & Co, of Holywell) appeared for the respondents.
