Commercial premises — Underlease — Rent review — Surveyor to fix rent in event of disagreement — “Upwards-only review” omitted from lease — Tenant in premises on basis of earlier lease which contained an upwards-only review — Surveyors for both parties negotiating on that basis — Whether lease as presently written accurately reflecting their intentions — Plaintiff landlord claiming rectification — Judgment for landlord
In 1988 by an underlease the plaintiff demised to the defendant premises at 3rd-floor rear, 30/32 Mortimer Street, London W1, for a term of nine years from May 1987. The reserved rent was for £14,000 pa for the first three years. The rent was then to be determined in accordance with the 4th Schedule, which defined the review dates as June 1990 and every third year thereafter. In default of agreement, an independent surveyor would determine the new rent on the basis of a hypothetical letting on the open market for nine years upon the terms of the underlease, but disregarding tenant’s goodwill, improvements and occupation. Clause 7 stated that if by the review date new rent was payable from that date, but had not been ascertained, the tenant would be obliged to pay rent arrears from the review date at the new rent once that new rent had been ascertained.
At the first review, market rents were increasing and the rent was fixed at £30,000. By the next review date in 1993, market rents had been falling and the value of the premises was around £10,000. The question for determination was whether the rent review mechanism was “upwards-only”. In negotiations which had preceded the taking of the lease, the plaintiffs maintained that they had agreed terms which included an “upwards-only rent review” and that the solicitors had been instructed accordingly. Further, in 1987 the defendant was already in occupation under a lease which contained similar provisions, but included the provision for “upwards-only” review. However, the lease as executed did not contain this provision. The landlords claimed rectification.
Held Judgment for the landlords.
1. As the law stood, the principles for ordering rectification were: (a) a common intention; (b) that that intention continued up until execution; (c) the instrument as executed failed accurately to represent the intention of the parties; (d) the instrument as rectified would represent the intention of the parties at the time. The evidence must show that on the balance of probabilities that those requirements were satisfied.
2. The court was satisfied to the standard of proof required that there was a common intention that there would be an “upwards-only” review provision.
3. There was some outward expression of that accord on the evidence, namely the letter from the plaintiffs’ surveyor to the surveyor of the tenant while negotiations were being conducted and particularly in view of the fact that the tenant’s surveyor wrote that “it follows the [former] lease”. Further, their surveyor accepted in evidence that the draft lease, without provision for an upwards-only review was unreasonable.
4. Clause 7 would be a curious provision to find in the underlease because it had no provision for “upwards-only” review when its purpose was to assist the landlord where the review was in fact upwards-only. The plaintiffs were therefore entitled to rectify the lease to include: if the surveyor comes to the conclusion that the current market value was less than the rent for the period preceding the relevant period, the new rent “shall nevertheless be the same as the current rent and the decision of the surveyor shall so state”.
David Holland (instructed by Brecher & Co) appeared for the plaintiffs; Erica Foggin (instructed by Clarks) appeared for the tenant.
