Landlord and Tenant Act 1954, Part II — Grant of new tenancy not opposed, but questions as to rent to be paid for agreed term of 15 years and as to interim rent — Shop premises occupied for business of bespoke and ready-to-wear tailors and outfitters — Zoning method of valuation adopted — Comparables considered — Correct figure to be arrived at not as a matter of arithmetical calculation but of judgment — Effect of restricted user provisions in lease reflected in a 10 per cent reduction in rental figure — Interim rent assessed by a deduction of 10 per cent to reflect yearly tenancy basis under section 24A(3) of the Act of 1954 — Interesting review of expert evidence by judge
This was an
originating summons taken out by the plaintiff tenants, U D S Tailoring Ltd.
The defendants were the plaintiffs’ present landlords, B L Holdings Ltd. The
proceedings, under the Landlord and Tenant Act 1954, Part II, concerned shop
premises at 204 and 206 Edgware Road, St Marylebone, London W2. The matters to
be determined by the court were only the amount of the rent to be paid for the
tenancy, the grant of which was not opposed, for an agreed term of 15 years,
and the amount of the interim rent in accordance with section 24A of the Act of
1954.
T H Moseley
(instructed by Conway Kramer, of Leeds) appeared for the plaintiff tenants;
Paul de la Piquerie (instructed by Burton & Ramsden) represented the
defendant landlords.
Giving
judgment, MR VIVIAN PRICE QC said: These proceedings are concerned with shop
premises at 204 and 206 Edgware Road, St Marylebone, London W2. The basic facts
between the parties are agreed as follows (and I quote from paragraphs 2(i) —
(v) of the originating summons taken out on behalf of the plaintiff tenant, U D
S Tailoring Ltd, now known as John Collier Menswear Ltd). In that summons are
stated the required particulars:
(i) The premises are known as 204-206 Edgware
Road, St Marylebone, London W2.
(ii) The said premises were demised by one Maxwell
& Ponting Ltd to the plaintiff, then called Price’s Tailors Ltd, by a lease
dated March 24 1966 for a term of 14 years from May 25 1966, the reversion is
now vested in the defendant.
(iii) The annual rent reserved by the said lease is
£5,250, the rateable value of the said premises £6,638.
(iv) The plaintiff occupies the whole of the said
premises for the purposes of its business of men’s and women’s bespoke and
ready-to-wear tailors and outfitters.
(v) By a notice to terminate dated September 10
1979 the defendants’ predecessors in title, Moorage Property & Developments
Ltd and Metropolitan Properties Co Ltd, being the plaintiff’s landlords at that
date and who hereinafter are referred to as the then landlords, gave the
plaintiff notice under the provisions of section 25 of the Landlord and Tenant
Act 1954, determining its tenancy of the said premises on March 25 1980,
stating in the said notice the landlords would not oppose an application to the
court for the grant of a new tenancy.
On October 3
1979 the plaintiff gave notice to the then landlords that the plaintiff would
not be willing to give up possession of the said premises on the date of
termination specified in the said notice of September 10 1979. The grant of a
new tenancy is not opposed, save for the rent to be paid for the period of the
tenancy, which has been agreed at 15 years, and save for the interim rent. A
draft agreed lease has been produced before me; I do not need to refer to its
terms save in one respect, namely the user restrictions, which I shall consider
later.
I have been
much assisted in approaching the question of deciding the open market rental
value of the premises by an expert report prepared on behalf of the plaintiff
tenant by Mr J A L Buckingham [ARICS, a partner of Jones Lang Wootton] and an
expert report prepared on behalf of the landlord — B L Holdings Ltd — by Mr
Derek James Abbott [FRICS, partner of Conrad Ritblat & Co]. Both these
expert valuers also gave oral evidence before me as to the assistance to be
gained in deciding the open market rental value by considering the turnover of
the business and, alternatively, by considering the overall average rental per
square foot rather than adopting the more conventional zoning system of
valuation. In the present proceedings, I am satisfied that no real assistance,
on the evidence adduced before me, is to be gained from considering either of
these alternatives, but I must emphasise that I have reached that conclusion on
the evidence adduced before me and I am not approaching it in any way as a
matter of principle.
However, in
the present proceedings, I think that it is correct that I should proceed on
the conventional zoning basis and I shall do so accordingly.
The first
matter that I have to decide is which premises are to be considered as
comparable. The premises, the subject of these proceedings, are in a block
(known, I think, as The Parade) and it is agreed between the parties that four
comparables to be considered are 222, 208, 226 and 216 Edgware Road — all in
the same block, The Parade. In addition, however, the tenant considers that
three additional premises should be considered, all south of the Old Marylebone
Road, 198 Edgware Road and 135 and 141 Edgware Road, the two latter being part
of what is known as ‘The Water Gardens Development’. I do not think that any
assistance is to be derived from 198 Edgware Road since, although it is very
close to the corner premises with which I am concerned — effectively being
across the Old Marylebone Road — I did not find the evidence relating to it at
all helpful.
Mr David
Smythe, an estate management assistant working for the Legal & General
Assurance Society, who gave evidence before me, was unable to give any very
useful assistance on the way in which the new rent for 198 Edgware Road was computed,
other than producing a document which set out the calculations (some of which
were in his writing) and other calculations including, apparently, the final
calculations which resulted in an agreed rent of £11,000. Mr Smythe, however,
as he pointed out, was not a valuer in any way; he was a property management
assistant and only gave evidence relating to what he was told to do. As to the
reasons why he was told to do that, as to the reasons why he was given no
information other than the lease renewal relating to the adjoining shop, I do
not know. He was unable to assist me and there was no further evidence relating
to that matter. I therefore find the evidence relating to 198 Edgware Road of
no assistance and I ignore it.
In my view,
however, the evidence relating to 135 and 141
the same block as the premises I am considering. They are also in a block,
south of Sussex Gardens and of the Old Marylebone Road and there was some
evidence before me that they were thereby placed in a different shopping
category. They are in my view, nevertheless, sufficiently proximate to the
premises I am considering that the evidence relating to them should not be left
out of account. The comparable premises that I shall consider are as follows:
first of all, 222 Edgware Road, with a ground-floor area of 955 sq ft and I
should mention that the ground-floor area of 204-206 Edgware Road is (if my
arithmetic is correct) 1,531 sq ft. I should interpolate at this point that any
arithmetic that I put forward in this judgment will, I hope, be checked very
carefully before I am asked to make any order whatsoever pursuant to this
judgment. But, as I have said, according to my arithmetic, the ground-floor area
of the subject premises is 1,531 sq ft — considerably larger, I may say, than
any of the comparable premises. The ground-floor area of 222 Edgware Road (the
effective date of renewal being December 12 1978) of 955 sq ft, and the zone
‘A’ rents, were calculated by Mr Buckingham at £15 per sq ft, whereas Mr Abbott
calculated the zone ‘A’ figure at, I think, £14.68. The second comparable is
208 Edgware Road (the effective date again being December 12 1978) and the
ground-floor area is 736 sq ft, the overall rent £9,869. The zone ‘A’ figure
calculated by Mr Abbott at £14.59 and that calculated by Mr Buckingham at £14
per sq ft. The third, not in point of time, but in the same block, is no 226,
the effective date of which is June 1979, the ground-floor area is 943 sq ft,
total rent £14,500. The rent calculated by Mr Buckingham is £16.86 and that
calculated by Mr Abbott £17.65. And then, finally, in the same block, no 216
where effectively the only evidence is that of Mr Abbott, that is, relating to
the calculation of zone ‘A’, because the information that was provided to Mr
Buckingham in respect of these premises was, as he agreed, inaccurate. He was
taken in evidence through Mr Abbott’s calculations which he accepted, the
effect of which is this: that for no 216 the effective date for the renewal was
September 1980, ground-floor area 519 sq ft, the rent was £8,350 and the zone
‘A’ figure was £19.10.
Those are the
four comparables in the same block and I think it is correct to say that in
approaching the assessment of the zone ‘A’ figure for the premises 204-206
Edgware Road, I have taken these four premises within the same block as being
more directly comparable with the subject premises than the two others that
should also, in my view, be considered — that is nos 135 and 141, also in
Edgware Road but in the Water Gardens development. I should also say, in
respect of those two, that evidence was given before me by Mr Malcolm Donald
Dalgleish, a chartered surveyor [senior partner of Dalgleish & Co], who was
concerned on behalf of the tenant in the negotiations for the renewal of the
leases in respect of these properties and produced before me certain documents
relating thereto which basically set out the measurements of the two properties
and the rent that was finally agreed in respect of them. It is true to say,
however, in respect of Mr Dalgleish’s evidence that, as he very fairly said
when asked questions about the way in which values were put on such matters as
the basements and also in respect of the disagreements that occurred during the
negotiations, he was unable to remember the details of the transactions with
which he was concerned. He relied upon the documents that, indeed, had been
placed before me, setting out the bare facts of the measurements and the zone
‘A’ valuations. I find that I really can rely upon those documents only,
indeed, upon his evidence for no more than that — I say that without dismissing
Mr Dalgleish’s evidence — it seems to me that he was being as helpful as he
could within the limits of his memory, but was not prepared to go outside. So I
rely upon the documents that are produced by him (or, at least, to which he
refers), but I also take into account Mr Abbott’s expert view in relation to
both these premises — that is both 135 and 141 Edgware Road — that the rents
agreed for them were, in his view, on the low side. 135 Edgware Road — the
effective date of the renewal was March 1979, the ground-floor area was 745 sq
ft, the rent £8,700 and the zone ‘A’ value, calculated by Mr Buckingham, was
£13.75; the zone ‘A’ calculation by Mr Abbott was £15.43, and Mr Dalgleish’s
figure was £15. In respect of no 141, the effective date was June 1979, the
ground-floor area was 1,241 sq ft, the effective rent was £10,700, the zone ‘A’
figure calculated by Mr Buckingham was £14, and the zone ‘A’ figure calculated
by Mr Abbott was £15.39. Mr Dalgleish’s figure again was £15 for zone ‘A’.
Very
considerable discussion took place between the two experts before me as to the
way in which these zone ‘A’ figures should be approached. In his report, Mr
Buckingham, who obviously was taking into account 198 Edgware Road (which, as I
have said, I rejected) which he calculated as a £15 per sq ft zone ‘A’ figure,
took into account nos 135 and 141, which were lower than £15 even though Mr
Dalgleish’s figures were £15; he took into account the £15 zone ‘A’ figure for
no 222 and the £14 figure for no 208 and he came to the conclusion that the
fair rent was of the order of £15. I think that later, and certainly in his
closing speech, Mr Moseley accepted that it should be a small amount higher
than £15. Mr Abbott, for the landlord, approached it in a different way; he
said ‘Well, now, look at these figures. The most relevant ones are the ones in
the block — that is in The Parade’. He points out that he was concerned with
negotiations that led to all four of those figures and those agreements but, in
response to cross-examination by Mr Moseley, he pointed out that it was not
just he with the expert valuer that was concerned in all the negotiations;
there were expert valuers of high repute acting for the other side in each
case, so that each of the figures which which he was concerned were figures
that were the results of negotiation between expert valuers on both sides. He
therefore pointed out that the most relevant valuations were the ones that were
immediately contemporary in time and he points to, as can be seen from the
figures I have already referred to, an increasing rate for zone ‘A’. I think Mr
Abbott accepted — and certainly counsel appearing for the landlords accepted —
that perhaps the figure for no 216 was too high to be related to the block in
question, that is £19 per sq ft. I think that the way it was put by counsel on
behalf of the landlords is that the figure should be somewhere within the band
of the two latest figures — namely £17.65 for June 1979 and £19.10 for
September 1980. I take all these matters into account and all the factors that
have been urged before me by Mr Buckingham. At the same time, I find that it is
impossible to arrive at a satisfactory figure for the open market rental value
of 204-206 Edgware Road merely as a matter of calculation. It seems to me that
the appropriate way to arrive at the correct figure is to bear in mind all the
factors that are adduced before me, bear in mind the figures that have been put
before me, to bear in mind the very helpful expert assistance of Mr Abbott and
Mr Buckingham but to weigh all those factors together as a matter of judgment,
not as a matter of calculation, and upon that basis, on taking all these
matters into account, I think that the zone ‘A’ rate that should be applied to
204-206 Edgware Road, in assessing the open market rental value, should be
considerably less than the £19.10 rate agreed for no 216 but considerably more
than the rates for nos 222 and 208 and I assess the appropriate zone ‘A’ rate
at £17 per sq ft.
Now, Mr
Buckingham asserted that the zoning method was only appropriate to nos 204-206
if a substantial discount were to be made to reflect the fact that the width
and shallow depth and the consequent zone ‘A’ area is disproportionately high.
I am not satisified that Mr Buckingham, on the evidence, has made out any such
proposition. I go further and say that the evidence that has been adduced
before me does not support such a view in any way and I am not, therefore,
prepared to make such a reduction. Before I come to the calculations with
which, as I have said, I would like to have some corroborative assistance
before I come to any question of making an order, it is the case that whatever
the ground-floor area figure comes to, it is agreed that 5 per cent should be
added (of the ground-floor rent only) to reflect the fact that the shop
premises are corner premises. It is also agreed that the value to be attached
to the basement should be storage — 979 sq ft @ £2, which comes to £1,958.
There are two
other matters, however, to be considered before I come to the calculation:
first of all, there are the restricted user provisions in the lease and,
secondly, calculations were made by Mr Buckingham of a 10 per cent reduction to
reflect the rebuilding
circumstances, so I can ignore that second reduction, but I have to consider
what amount, if any, should be reflected in the open market rental value by the
user restrictions contained in the lease. Now, as I have said, the terms of the
lease — apart from the question of rent — have been agreed before me and I do
not need to go through the lease which is, as one might imagine, a long
document. The tenants’ covenants with the landlord are set out in clause 2,
which begins at p 2 of the lease — I do not need to consider those — but if one
goes on to p 8, subclause 13 of clause 2 is in the following terms:
Subject to
the tenant obtaining all the necessary consents from statutory and other
authorities to use the demised premises as a men’s and women’s bespoke and
ready-to-wear tailors and outfitters, such trade or business to be carried on
in a high-class manner provided that if, in the sole opinion of the landlord,
it shall deem any application by the tenant to use the demised premises for any
other retail trade or business than that hereby authorised, not to be in
conflict with any trade or business already or then about to be carried on or
authorised to be carried on in or upon the property forming part of the block
formed by 204-256 Edgware Road and 332 Old Marylebone Road or otherwise in
conflict, except as to the specified trade or business hereby authorised with
any of the provisions of this lease, the landlord will not unreasonably refuse
its consent to such change of use.
Now, Mr
Buckingham took the view that the restrictions thereby imposed upon the tenant
and accepted by the tenant, were of such a nature that it would be fair and
appropriate to make a deduction of 15 per cent in the rental figure to reflect
this user provision. Mr de la Piquerie, on behalf of the landlord, effectively
submitted that the user restrictions contained in the clause that I have read
were really no greater than those imposed upon the tenants (and, indeed, the
rights given to the tenant) under the general law. Nevertheless, Mr Abbott, the
landlord’s expert witness, accepted that it would be appropriate to make some
deduction in respect of the restrictions, whatever they were. The exact nature
of the restrictions is, of course, a matter of law. I am bound to say that I am
not satisfied that these restrictions are no more than coterminous with those provisions
of the general law; I think that the restrictive conditions do impose a burden
upon the tenant over and above that imposed by the general law and I therefore
think it appropriate to make a substantial reduction. I think, however, that 15
per cent is far too high a figure for that and, again, in my assessment (which
again I must emphasise cannot be a matter of calculation) the correct figure
for deduction should be 10 per cent.
The
calculations that I therefore make, and I will set them out so that they may be
checked, are these:
In respect of
the ground floor, the zone ‘A’, which is 912 sq ft @ £17 per sq ft I calculate
at £15,504.
Zone ‘B’ — I
think this figure is agreed at 619 sq ft, but again, perhaps this could be
checked — 619 sq ft @£8.50 I calculate at £5,261.50, making a total of
£20,765.50.
To that must
be added 5 per cent to reflect the corner site, which I calculate at £1,038.28.
Again, the
agreed figure for the basement, which is storage, is 979 sq ft @£2, which is
£1,958, making a total of £23,761.78.
From which I
deduct 10 per cent to reflect the user restrictions contained in clause 2(13)
of the draft lease, which is a deduction of £2,376.18, making a total of
£21,385.60.
The final
matter with which I must deal is the question of the interim rents. It is quite
clear upon the authorities that have been cited to me (and I do not need to
quote) that in arriving at a figure for the interim rents I should take into
account the fact that the interim rent is to be calculated upon the basis of a yearly
tenancy and the question is as to what, if any, deduction should be made from
the rent that I have just assessed in order to arrive at the interim rent in
respect of these premises. Mr Buckingham considered that the due allowance that
should be made to reflect yearly tenancy should be a deduction of 20 per cent
from the open market rental value. Mr Abbott considered that a reduction of 10
per cent would be appropriate. He referred to a rental that had been paid in
respect of 256 Edgware Road for a period of nearly two years to a retailer
selling men’s clothing on a series of very short tenancies without security of
tenure at a quarterly rent of the equivalent of £24,700 and he has pointed out
that he did not introduce this matter in order to derive a comparable rental
value but to demonstrate that on a year-to-year basis a demand does exist, more
so for the lessee’s user, perhaps, than any other user. I think it was, indeed,
agreed between the parties that the use that is made of 204-206 Edgware Road —
namely as a clothing store for men’s clothing, for outfitting etc — is perhaps
the most popular and most valuable use that there is in the country as a whole
and that, therefore, even on a year-to-year basis, it is of value. It seems to
me that the figure that is put forward by Mr Abbott is, in all the
circumstances of these proceedings, the appropriate figure and I therefore
think that the appropriate interim rent should be the annual open market rental
value that I have assessed, with a deduction of 10 per cent — namely
£19,247.04.
