Landlord and tenant — Construction of rent-review clause in lease — Provision that the fair market rent for the purpose of the clause was to be the best annual rent obtainable between a willing landlord and a willing tenant on a letting of the premises as a whole with vacant possession for use for any purpose within Class III of the Town and Country Planning (Use Classes) Order 1972 or any other class or classes of the order permitted by the planning authority from time to time — Premises had been used for the purpose of a light industrial building but were vacant at the date of the present lease — Planning permission had, however, been given for a change of
In these
proceedings the plaintiffs, Werner and Esther Wolff, as trustees of the Wolff
Charity Trust, landlords of premises in the Borough of Enfield, sought
declarations as to the construction of the rent-review clause in leases of the
premises, The defendants, the London Borough of Enfield, were the lessees. The
premises covered the lower-ground floor and part of the ground floor of the
Chase Side Works and were in fact in use as a service unit for the Middlesex
Polytechnic.
Ronald H
Bernstein QC and J C Harper (instructed by Thornton Lynne & Lawson)
appeared on behalf of the plaintiffs; A T K May QC and S A Furst (instructed by
Wilfred D Day, chief executive and town clerk, London Borough of Enfield)
represented the defendants.
Giving
judgment, WHITFORD J said: On August 22 1977, Super Services (Holloway) Ltd and
the Mayor, Aldermen and Burgesses of the London Borough of Enfield entered into
two agreements for a lease to the Borough of Enfield of certain premises. The
leases that were entered into were, so far as one of them is concerned, a lease
that was to run for a term from the date I have just mentioned till March 23
1983. The other lease entered into on the same day was to come into effect two
days after March 23 1983 and to run until August 21 2002. There was a provision
in the agreement which I can conveniently call the first agreement, it being
the only one which needs to be considered for the present purposes, with regard
to rent. This provision was that for the first five years of the term of the first
lease the rent should be £39,000 a year and that for the remainder of the term,
which was a not very long period of time, the yearly rent should be £39,000 or
the fair market rent of the demised premises at the commencement of the final
period, whichever was the higher. We have now reached a point in time at which
the appropriate rent for the last period has got to be determined.
The plaintiffs
succeeded to the interests of Super Services (Holloway) Ltd and there is
disputation between them and the Borough of Enfield as to how the fair market
rent is to be determined.
The first
lease did in fact contain a provision, which I can just briefly refer to before
going to that part of clause 1(2) which is determinative of this dispute,
because among the covenants that were entered into by the lessees was a
covenant
not to use
the premises in question otherwise than for light industrial purposes within
Class III of the Town and Country Planning (Use Classes) Order 1972 or for such
other purpose for which planning permission shall have been obtained and the
landlords have first approved in writing, such approval not to be unreasonably
withheld.
Effectively,
the position so far as use as at the date of the lease was concerned was this.
The premises were then standing vacant. They had in fact been previously
occupied by an organisation that was using them for light industrial purposes.
Prior to the date of the leases there had been an application for change of
use. There had been in fact a permission granted. There can be no doubt from
the documents in the case that at the time when the leases were drawn up Super
Services (Holloway) Ltd would have been aware that there had been this
application and would have been aware of the use that was in contemplation.
Against this background
I come to that part of the first lease which says how you are to determine the
fair market rent. It is clause 1(2) and it runs, so far as is material, in
these terms:
The said fair
market rent shall be the amount which shall be agreed between the Landlord and
the Tenant to be the best annual rent for the time being obtainable as between
a willing landlord and a willing tenant in respect of the demised premises on a
letting thereof as a whole with vacant possession for use for any purpose
within Class III of the Town and Country Planning (Use Classes) Order 1972 or
any other class or classes of the said order within which falls the use or uses
of the demised premises permitted by the planning authority from time to time.
Of course,
clearly at the time when this lease was drawn up the lessors were aware of the
fact that there was going to be a change of use. They may, I think, perhaps
have been forgiven for being not wholly certain of what the exact nature of the
use pursuant to the permission granted was going to be likely to be. As I have
said, the previous occupants of the premises had in fact been using them for
light industrial purposes. The premises in question are called Chase Side Works
and on first reading of this particular provision it seems plain enough that
what was intended was that if there was to be a fair rent decided it might be
either the rent which would as between a willing landlord and willing tenant be
a fair rent in respect of the premises if they were used for light industrial purposes
if you were letting the whole of the premises for that particular purpose and
were giving vacant possession. Alternatively, it was no doubt contemplated that
if in fact pursuant to a decision of the planning authority there was a use
falling within some other class or classes which would on a letting as between
a willing landlord and a willing tenant of the whole of the premises with
vacant possession produce a higher rent, then that would be the fair market
rent for the purposes of the lease.
It is
necessary at this stage, I think, to turn to the question of planning
permission. There was an application made, the applicants being the Middlesex
Polytechnic, acting through the chief education officer of the local education
authority, which gave particulars of the proposed development or use to which
the existing buildings were intended to be changed, a use as a non-teaching
service unit for the Middlesex Polytechnic primarily for office purposes and
light industrial work, such as printing. So, just looking at the information
upon the face of the application, it appeared to contemplate that there would
be some office work and some light industrial work. Merely stopping at that
point without going any further, on authority well known, the question as to what
the nature of the use overall might be could conceivably depend upon the extent
to which the premises were in fact going to be used for light industrial
purposes, the office side of the matter being incidental to the light
industrial work, as opposed to a situation in which basically the premises were
going to be used for office purposes with the light industrial work being
perhaps wholly distinct or perhaps in part connected with the office use.
Printing may be a necessary adjunct to certain office activities, and if
printing were merely ancillary to an office use of the premises overall then no
doubt the use actually taking place could properly be described overall as
office use.
I must refer
very briefly to what in fact happened, because to my mind it has no real effect
upon the answer that must be given. What happened was that the premises in
question, which covered the lower-ground floor and part of the ground floor of
the Chase Side Works, were used as a service unit for the Middlesex Polytechnic,
the use in question, it stands agreed, being in part undoubtedly office use.
There were offices which served the Middlesex Polytechnic in one way or
another. There were some uses which on the face of it would be no more than
ancillary to the office services; the provision of a canteen and restaurant
kitchen, the provision of cleaners’ cupboards, and so forth would not take it
out of the field of office use. There were activities carried on which in turn,
it stands accepted, although they may have been in part ancillary to the office
use, were in part independent, the printing facilities, facilities for the
production of graphics, and a darkroom. There were other usages which may,
although I have no very precise information on it, have been more properly described
as the use of parts at least of the premises as a repository, or which may
really have been no more than a storage for purposes ancillary to the overall
office use.
There was the
application and, as I have indicated, it was, and must have been known to the
original lessors to have been, successful, and the declarative permission was
granted. The permission that was granted was a permission for change of use of
the premises from light industry to a non-teaching service unit for the
Middlesex Polytechnic.
If one now
comes back to clause 1(2) of the first lease, I have to
You have got to consider premises which are notionally vacant with no use of
any sort or kind being carried on. As I have said, I do not really think what
actually happened is of any moment at all, and you have got to consider the
premises being let as a whole. Then you can proceed to determine what as
between willing landlord and willing tenant would be a fair rent for those
premises used for Class III purposes, and then you have got to see whether
there could be a use for purposes within any other class or classes of the
relevant order within which fall the use or uses of the demised premises
permitted by the planning authority from time to time. Of course, it was quite
sensibly contemplated that over the years — of course, there was going to be
only one rent review on the first lease, but at five-year intervals there will
be a number of possible rent reviews on the second lease — whatever might be the
position in respect of the planning permission which had been granted at the
time when these leases were entered into, there might be further applications
for change of use. Whatever was permitted as at the date when the agreements
were entered into, there was not necessarily going to be the permitted use at
the first rent review date or indeed at any subsequent rent review date. The
lessees might from time to time seek to secure permission for other uses which
would be of service to them.
So the question
arising is this. If one looks at what was permitted by the planning permission
granted in July 1977, can it be said that the use permitted falls within any
class or classes of the order, which of course necessarily carries with it the
question — if it does, which class or classes are included within the
permission granted? It was not, of course, suggested that there is a class of
non-teaching service units, and even if there were it must to my mind be quite
plain that there is no class of non-teaching service unit for the Middlesex
Polytechnic. Mr Bernstein, on behalf of the plaintiffs, says it would be quite
wrong to pay any attention to the inclusion of the reference to the Middlesex
Polytechnic in the permission granted. Provided the permission granted is used
by somebody within the general ambit of the grant it does not matter who that
person is, that is to say this permission was adequate to enable anybody to say
that they ought to be allowed to operate a non-teaching service unit even
though they were not going to do it for Middlesex Polytechnic. That, says Mr
Bernstein, is because a case, Carpet Decor (Guildford) Ltd v Secretary
of State for the Environment, has so decided. It is reported in (1981) 261
ESTATES GAZETTE 56. It was a case that was heard by Sir Douglas Frank, sitting
as a deputy judge of the Queen’s Bench Division. It was a case concerned with
the use of vaults which had been used for a considerable period of years for
the storage of documents. A point in time arrived at which the vaults ceased to
be used for the storage of documents. They were in fact used for the storage of
carpets. It was said: ‘This is a repository use and the use for the storage of
carpets as opposed to the storage of documents does not amount to a change of
use.’ It was held that this was right. The use for the storage of carpets was
still a use within the same class and accordingly did not constitute
development. The report of the case certainly makes it quite clear that what
was applied for and in fact originally secured was a permission to use the
vaults as a store for papers of National Provincial Bank Ltd and as residence
for a caretaking employee of the said bank but for no other type of store or
for any other person or corporation. We do not need to consider the question of
residence of the caretaker. There was an application which in terms was seeking
permission for the limited purpose of storage of papers for the National
Provincial Bank and nobody else.
The report
indicates that the application, which contained a question ‘State whether the
permission is desired as a permanent development or use for a limited period
and if the latter for what period’, resulted in an answer given on the
application form ‘during ownership by National Provincial Bank only’. I think
Mr Bernstein can rightly say that from the terms of the report it would appear
that the permission that was granted was granted for the development described
and the only condition that was recorded was that there should be no variation
of the deposited plans and particulars without previous authorisation by the
relevant council. There was an argument submitted that the planning permission
was limited in time to the ownership of the premises by the National Provincial
Bank. Sir Douglas Frank says this:
I think that
this case turns on the proper construction of the planning permission. As a
general principle, where a local planning authority intend to exclude the
operation of the Use Classes Order or the General Development Order, they
should say so by the imposition of a condition in unequivocal terms, for in the
absence of such a condition it must be assumed that those orders will have
effect by operation of law. As I have said, the parts of the planning
permission relied on here are in common form and printed on the documents.
Their purpose is to ensure that the operations are carried out in accordance
with the deposited plan and that the premises shall be used for the purpose
described. I do not read this document as doing more than that, and certainly
not as excluding the operation of the Use Classes Order.
Referring to
the argument based upon the reference to use for the storage of papers for the
National Provincial Bank, Sir Douglas Frank said:
Mr Harper
argued that both the use and its duration were defined in the application and
incorporated in the permission and therefore cut down the scope of the
permission, thereby making it not open to the appellants to rely on the Use
Classes Order.
It does appear
to me from the terms of the report that some question arose in that case on
which from the report as cited I am not entirely sure that it emerges very
clearly whether it was argued that the permission in relatively general terms
could be cut down by referring back to the terms of the application. I am,
however, entirely in agreement with the approach of Sir Douglas Frank, which as
I see it is that you have got to look at the terms of the planning permission
to decide what use has been permitted, and in this case it is a use of the
premises as a non-teaching service unit for the Middlesex Polytechnic. That to
my mind quite plainly is a limitation which must be taken on the words which we
find and that this permission could not be used as a shield for the use of the
premises in question as a non-teaching service unit for any other organisation.
Even if this were wrong, as I think I have already indicated, it is plain that
there is no class of non-teaching service unit as a whole. It is well
established — Wells v Minister of Housing and Local Government
(1967) 18 P & CR 401 is a case in point — that permission may in fact be
granted which extends to activities which do not fall within any of the use
classes in the order. This was a case concerned with a builder’s yard and the
question was whether the erection of a plant making batches of concrete would
involve change of use or not. The uses that were involved in the operation of
the yard as a builder’s yard were manifold and in his judgment Lord Denning points
out in the plainest possible terms that there may well be permission granted
for uses which cannot be brought within any particular class. It is, I think,
the more likely to be the case where the activities in any particular building
or area which are going to be carried on and for which permission has been
granted are manifold in character, I think that the facilities that one would
expect to find being operated in a non-teaching service unit for any
organisation, whether for the Middlesex Polytechnic or not, are likely to be
manifold. The permission that was granted was granted in respect of all or any
facilities which might be appropriate to the activities of a non-teaching
service.
It cannot to
my mind be sensibly suggested that the permission that was granted in the
circumstances of this particular case was a permission falling within any class
or classes in the Use Classes Order and in the result, until there is a change
of permission, the rent must be reviewed upon the basis of a fair value of the premises
as a whole for light industrial use.
Judgment was
given for the defendants with costs.
