Landlord and tenant — Landlord and Tenant Act 1954 — Terms of new tenancy — Whether upwards/downwards or upwards-only rent review
The following
case is referred to in this report.
Janes
(Gowns) Ltd v Harlow Development Corporation [1980]
EGD 110; (1979) 253 EG 799, [1980] 1 EGLR 52
This case
concerns an application by Blythewood Plant Hire Ltd under Part II of the
Landlord and Tenant Act 1954 for a new tenancy of premises at 78a St Margaret’s
Road, Hanwell, London W7.
Paul Morgan QC
(instructed by Crane & Staples) appeared for the applicant tenant; Stephen
Jourdan (instructed by Richards Butler) represented the respondent landlord,
Spiers Ltd.
The premises
consist of a backland site of open ground, but which also has some buildings
erected on it. The land, which has no street frontage, lies behind the houses
which face St Margaret’s Road. The freehold of the premises, apart from the
principal access, is owned by the respondent landlord. The freehold of the
principal access is owned by the British Waterways Board. An easement or right
of way over the principal access was first demised to Spiers by a lease dated
November 30 1939. The current lease of the easement is dated January 13 1982
for a term of 21 years. The land, including the principal and secondary
accesses, was let by the respondent to the applicant by a lease dated July 7
1941 for a term of five years. On the expiry of that lease the applicant
continued to occupy the land on a yearly tenure on the terms and conditions of
the expired lease.
On January 5
1990 a receiver was appointed under a debenture in respect of the property and
undertaking of the respondent. The court was told that it is the intention of
the receiver to sell the land in order to realise its value for the benefit of
the bank which appointed him. On September 21 1990 the receiver caused the
respondent to give a notice under section 25 of the Landlord and Tenant Act
1954 to determine the applicant’s tenancy on March 25 1991. The notice stated
that the respondent would oppose the grant of a new tenancy on the ground
mentioned in para (f) of section 30(1) of the 1954 Act. On September 22
1990 the applicant served a counternotice, which stated it would not be willing
to give up possession of the property, and on January 7 1991 applied by
originating application to the court for a new tenancy seeking a lease of 14
years from March 25 1991 at a rent of £7,500 pa with five-yearly rent reviews.
Following the respondent’s answer, on May 7 1991 it withdrew its opposition to
the grant of a new lease and proposed a term of five years from March 24
1991 at a rent of £80,000 pa with a review on the penultimate day of the term.
The issues before
the court were: (1) whether the new lease should contain a development break
clause, and if so at what point during the term; (2) if not, should the lease
be for five years only? (3) should any
rent review clause be upwards only or upwards/downwards? (4) the amount of the new rent; and (5) the
amount of the interim rent.
Having dealt
with the first two issues by deciding that the applicant should be granted a
10-year term with a development break clause capable of operating at the expiry
of the seventh or any subsequent year of the term, JUDGE DIAMOND said:
It was agreed
that there should be a rent review clause to operate on the expiry of the fifth
year of the term. The wording of the clause was agreed subject to the question
whether there should be power to review the rent upwards and downwards or only
upwards. Neither of the two valuers who gave evidence had any practical
experience of a two-way clause and until recently such clauses were virtually
unknown in the real world.
A clause in
this form would have the result that the landlord’s interest would become more
difficult to market. It would therefore have an immediate impact on the value
of the landlord’s interest. On the other hand, the evidence suggested that a
tenant would not pay substantially more rent for an upward/downward clause as
such a clause is likely to be of little immediate benefit to the tenant. In
these circumstances I was not convinced that a two-way clause should be
inserted in the lease. I was pressed with a decision of Judge Finlay QC
(sitting as a judge of the High Court) in Janes (Gowns) Ltd v Harlow
Development Corporation (1979) 253 EG 799, [1980] 1 EGLR 52. In that case,
however, there was evidence as to a neighbouring development which might cause
the rent of the relevant premises to go down within the term. There is no such
fact applicable to the present case. I did not gain any assistance from the
reference to the old adage that what is sauce for the goose should be sauce for
the gander. In my judgment, therefore, the clause to be inserted in the lease
should be upwards only review clause.
The judge then
considered the evidence relating to the rent and interim rent. He determined
the rent of the new lease in the sum of £41,700, and determined that it would
be reasonable for the applicant to pay an interim rent at the rate of £20,000
pa.
