Lease providing for a “hypothetical lease” for rent review purposes — Whether on basis of “presumption of reality” hypothetical lease to run from date of grant of lease or from date of rent review
In March 1994, the parties entered into a commercial lease for a term of 25 years, commencing 1 April 1992, with five-year rent reviews. At issue was the question of when the “hypothetical lease”, for rent review purposes, was deemed to commence. The landlord claimed that it should run in tandem with the actual lease, that is, from April 1992, but the tenant contended that it should run from the relevant review date, namely April 2002.
Held: The claim was dismissed.
When interpreting lease provisions, the plain and ordinary meaning of the words was the key consideration; see Basingstoke and Deane Borough Council v Host Group Ltd (1987) 284 EG 1587. In the absence of express words, or a clear indication to the contrary, the premises were to be valued at the review date. Only explicit wording in a rent review clause would induce the court to depart from this “presumption of reality”.
The natural meaning of the relevant lease clause was that the hypothetical term was to run from the date of the rent review, not from the commencement date of the actual lease.
Michael Barnes QC (instructed by Linklaters) appeared for the claimant; Paul Morgan QC (instructed by Berwin Leighton Paisner) appeared for the defendant.
Vivienne Lane, barrister
