Landlord and tenant — Rent review clause — Proper construction of an early rent review clause in headlease based on rents derived from underleases — Effect of increased frequency of rent reviews in underleases
headlease dated November 7 1962 and made between Basildon Development
Corporation (‘the corporation’) and Kengrove Properties Ltd (‘the company’) the
corporation demised to the company a two-storey block of 22 shops with shop
premises and the ground level with storerooms and stockrooms over in Basildon —
The term of the headlease was of 125 years from March 31 1961 — Clause 4(1) of
the lease defined ‘a specified period’ for the purposes of rent review as being
as to the first period 28 years, four further successive periods of 21 years
and a final one of 13 years — The headlease had a fixed rent for the initial
period of 28 years and for the next and subsequent periods of 21 years the
lessor was to receive an additional rent calculated by aggregating the rents
achieved during the last 21 years of the initial period, and then taking one
twenty-first of that sum, and then estimating the rents expected to be achieved
during the subsequent period and dividing that by 21; if the latter sum is
greater, the landlord is to have an additional annual rent of one-fifth of the
difference between the two sums so divided by 21 — However, the lease failed
completely to contemplate that underleases would contain review provisions of
greater frequency than 21 years — To accommodate that development, the landlord
contended that if you have an actual underlease which has the relevant terms
about outgoings, repairs and insurance with rent review, then the valuer must
estimate the likely gross rate of that rent and add it to the total — For the
tenant it was contended that one looks at the rack-rent payable under any
underlease current at the time when the estimate is made and regard that as
conclusively determining the full rack-rent for the entirety of the residue of
the term of years demised by such underlease; the consequence of which is that
one ignores rent reviews in the case of current lettings at the time of the
review date
exercise to determine a fixed rent unreviewable for 21 years is what was
contemplated when this lease was drawn up — Applying a proviso in the rent
review clause concerned with circumstances where there is a rack-rent payable
under an underlease at the date when the estimate is made, because the lease
did not contemplate that the rents in the underleases would be reviewable more
frequently than every 21 years, the operation of the proviso must be limited to
that part of the term which precedes the next rent review in the relevant underlease,
and thereafter an individual shop will be treated as if the lease had expired,
leaving the valuer to estimate under the first part of the rent review clause
in the headlease a rent payable as for a reversionary lease, as he
would have to do in relation to shops where the underleases where going to
expire by effluxion of time in any event
No cases are
referred to in this report.
This was an
application by way of an originating summons seeking declarations as to the
proper construction of a rent review clause in a lease dated November 7 1962 of
a block of 22 shops and premises in Basildon, the reversion of which is held by
the plaintiff, the Commission for the New Towns, and the term by the defendant,
Chesterfield Properties plc.
Jonathan Gaunt
QC (instructed by D J Freeman) appeared for the plaintiff; David Neuberger QC
(instructed by Chethams) appeared for the defendant.
Giving
judgment, JUDGE PAUL BAKER QC said: I have before me an adjourned
originating summons which seeks answers to questions which have arisen upon the
construction of a rent review clause. It is an unusual clause. It is to be
found in the headlease of a block of some 22 shops in Basildon. In brief, the
lessor is to get a rent calculated by reference to the rents achievable in the
underlettings of the individual shops. More specifically, the lease had a fixed
rent for an initial period of 28 years. For the next and subsequent periods of
21 years the additional rent is to be calculated by aggregating the rents
achieved during the last 21 years of the initial period, and then taking one
twenty-first of that sum, and then estimating the rents expected to be achieved
during the subsequent period and dividing that by 21. If the latter sum is
greater, as might well be expected, the landlord is to have an additional
annual rent of one-fifth of the difference between the two sums so divided by
21. That is in summary the type of review clause.
The shops are
in the town centre of Basildon, a post-war new town. The site at the time of
letting was owned by Basildon Development Corporation. On December 29 1959 that
corporation entered into a building agreement with a company of building
developers called Kengrove Properties Ltd. It is reasonable to infer that the
terms of the lease subsequently entered into had by then been agreed. The
significance of that is that at that time it was unusual for leases of shops
and other commercial premises to contain clauses which provided for the rent to
be reviewed during the term. Owing to the high rate of inflation in the past
three decades, it is now commonplace for leases of commercial property of any
length to contain provision for reviews at regular intervals throughout the
term. Five years is a usual period. Such reviews are normally a market
valuation in some shape or form.
With that
introduction I can turn to the lease. It is dated November 7 1962 and made
between Basildon Development Corporation (‘the corporation’) and Kengrove
Properties Ltd (‘the company’). The plaintiff, the Commission for the New Towns,
and the defendant, Chesterfield Properties plc, are the successors in title
respectively of the corporation and the company.
The first
clause of the lease starts:
In
consideration of the expenses incurred by the Company in erecting the buildings
hereinafter mentioned upon the land hereby demised and of the rent and
covenants on the part of the Company hereinafter reserved and contained the
Corporation hereby demises unto the Company ALL THAT piece or parcel of land
situated in the town centre of Basildon in the County of Essex
— and then it
describes it by reference to a plan —
TOGETHER WITH
the buildings recently erected on the said land . . . and formerly known as
Block F1
— and then it
gives the numbers of them —
AND TOGETHER
WITH the canopy . . .
In fact, the
demised premises consist of a two-storey block of 22 shops with shop premises
at the ground level and with storerooms and stockrooms over.
I can now move
on to the habendum in the lease.
To HOLD the
same (except and reserved as aforesaid) unto the company from the Thirty-first
day of March one thousand nine hundred and sixty-one for the term of ONE
HUNDRED AND TWENTY FIVE YEARS PAYING THEREFOR during the said term the yearly
rent of NINE THOUSAND POUNDS AND ALSO from and after the commencement of the
twenty second year of the said term such further or additional yearly rent (if
any) as is hereinafter provided to be paid by Clause 4 hereof each of such
rents to be paid without any deductions . . . by equal half yearly payments in
arrear on the Thirty-first day of March and the Thirtieth day of September in
each year the first of such payments of the said yearly rent of NINE THOUSAND
POUNDS being in respect of the period from the Thirty-first day of March one
thousand nine hundred and sixty one to the Thirtieth day of September one
thousand nine hundred and sixty-one having been made on or before the date
hereof and the first of such payments of any such additional rent as aforesaid
calculated as from the commencement of the period in respect of which the same
shall become payable to be paid on the first of the said half yearly days shall
next occur after the date of the commencement of such period as aforesaid or
the date on which the amount of the said rent shall be ascertained under and
having regard to the provisions of Clause 4 hereof (whichever shall be the
later) . . .
That is the
habendum. Before I pass from it, I note, and it is common ground, that the 22nd
year mentioned there is an error and it should be the 29th year. It is quite
clear as a matter of construction that that is a simple error. It is
inconsistent with the more detailed provisions of clause 4.
Clause 4 is
the only other part of the lease to which I need refer. It is divided into two
subclauses, (1) and (2). Subclause (1) contains definitions. Subclause (2) is
the operative part of the clause. The definitions, or most of them, are
important and I must go through them. The first says:
. . . ‘the
First Specified Period’ means the period of twenty-one years of the said term
of one hundred and twenty-five years created by this lease expiring
twenty-eight years from the date of commencement of the said term.
So one sees at
once that that is inconsistent with the earlier mentioned period of 22 years.
That brings the term to March 31 1989. That is the review date in respect of
which the problems have arisen. That is the first period. The next definition
is:
‘A Specified
Period’ means either the First Specified Period or one of the other following
periods of the said term of years created by this Lease . . .
Then five of
them are listed. Four of them are successive periods of 21 years and the final
one of the residue is 13 years, making a total with the initial 28 years of 125
years. The specified period in respect of which the new rents are to be paid is
the first of those, that is to say from the 29th year to the 49th year of the
term, both such years included; so that is a period of 21 years starting on
April 1 1989.
The next
definition is that of a ‘formal determination’, which occurs throughout the
clause.
‘Formal
Determination’ means a determination of a dispute or difference between the
Corporation and the Company as respects any calculation or estimate required to
be made by or for the purposes of this Clause 4 by a surveyor or surveyors
under and in accordance with the following provisions that is to say:
(a) If any such dispute or difference as
aforesaid shall at any time arise between the Corporation and the Company after
the Corporation or the Company may at any time by notice in writing to the
other of them require agreement upon a person being a duly qualified
independent surveyor (who specialises in the valuation of shop properties) to
act as a sole arbitrator in such dispute or difference under the Arbitration
Act 1950 and in default of agreement upon the person so to act as arbitrator
within fourteen days of such notice.
So the person
required is an independent surveyor who specialises in the valuation of shop
properties, and he is to deal with any calculation or estimate which may be
required if the parties cannot agree upon it themselves. Then there is a
provision that in default of agreement the President of the Royal Institution
of Chartered Surveyors can be applied to appoint such a person. Then there is a
provision about his fees, which I need not read.
The position
is that a surveyor has been appointed, either by agreement or by appointment of
the president, I am not quite sure which, but he has not completed or it may
even be that he has not entered upon his duties, pending the clarification of
these points of construction under the lease. That is ‘formal determination’.
Next is
rack-rent, which is an important definition.
‘Rack Rent’
means the exclusive rent payable under an underlease or tenancy agreement and
ascertained on the footing that the sub-lessee or tenant by whom the same is
payable is liable to bear the cost of . . .
Then I can
summarise those — outgoings, repairs and insurance. This definition does not
say the annual rent or the periodic rent, it says the exclusive rent payable
under the underlease or tenancy, so it would appear to be looking at the
entirety of the rack-rent payable under the relevant underlease. But it would
be a rack-rent only if the underlease contained terms that placed the burden of
the outgoings, repairs and insurance upon the tenant. Of course that is a very
common position, so there is nothing very surprising about it, but if the terms
were different from those then the rent would, it seems, not be a rack-rent.
I now move on
to the next definition.
‘Full Rack
Rent’ means a rack rent for any part of the demised premises of such amount as
would be the best rent which could reasonably be obtained for
prevailing at the time when such rent is agreed or otherwise ascertained.
That would
seem to be in the terms of a hypothetical rent. It is not necessarily a rent
that is actually payable as is a ‘rack rent’ taken by itself. It is a rack-rent
for such amount as would be the best rent which could be obtained for the
period of which the same may be payable under the market conditions prevailing
at the time when the rent is agreed or otherwise ascertained. But again one
notices about that that it does not seem to contemplate any reviews. Again it
is an entire rent, not merely a yearly instalment of it.
‘Additional
yearly rent’ is the next definition I come to, and this introduces the concept
of a periodic or yearly rent for the first time in these definitions.
‘Additional
Yearly Rent’ shall mean a yearly rent of such amount as may be ascertained by
the conversion into yearly rent under the six per cent (Single Rate) Valuation
Tables contained in the Seventh Edition (fifth Impression) of Parry’s Valuation
Tables of any fine or premium or other capital sum (other than in respect of
the provision of a shop front and shop fitting expenses including all
professional charges and disbursements) payable by an underlessee or tenant to
the Company under any underlease or tenancy agreement of part of the demised
premises and which shall be deemed to be payable as from the date of payment of
the fine or premium or other capital sum hereinafter mentioned during the
remainder of the term demised or agreed to be let by the underlease or tenancy
agreement under which such fine premium or other capital sum shall become
payable.
That is a
provision drawn with some precision to convert a premium into a rental payment.
We now come to
‘Basic rack rent’, and here we are introduced to another yearly rent. Although
the interpretation of this has not given rise to disputes with which I have had
to deal, it is important within the context of this dispute.
‘Basic Rack
Rent’ means a yearly rent for the demised premises equal to one twenty-first
part of the aggregate of the following rents namely:
— and it is in
three parts. The first is:
(a) the total Rack Rents actually agreed or
covenanted to be paid to the Company by underlessees or tenants of the demised
premises or any part or parts thereof for the First Specified Period or any
part or parts thereof . . .
Pausing on
that point, it is the total rents which are actually paid or covenanted to be
paid under underleases which may run during any part of that period, for
example five years at the beginning, in the middle, or the whole 21 years — and
then there is a qualification to it:
PROVIDED that
if the term of years created or agreed to be created by the Company by any
underlease or tenancy agreement shall be determined either by surrender or
forfeiture or otherwise previously to the expiration of the period for which
the same shall have originally been created or agreed to be created and the
premises comprised in such underlease or tenancy agreement shall have been
re-let by the Company for a term of years commencing previously to the
expiration of the period aforesaid then the rent for such premises covenanted
or agreed to be paid to the Company by the underlease or tenancy agreement
whereby the said premises shall have been so re-let shall be treated as being
the rent covenanted or agreed to be paid to the Company for such premises for
the purposes of this sub-paragraph during the term for which such premises
shall have been so re-let in lieu of the rent covenanted or agreed to be so
paid during the said term of years which shall have been determined.
This provides
that if the lease comes to an end through forfeiture or surrender and is relet,
then the rent under the relet lease is substituted for the covenanted rent
under the previous lease. If that does not happen then it would seem
that the covenanted rent is the governing rent. There was some discussion
before me that it seemed to omit the case of leases that expire by effluxion of
time during the period, but I have come to the conclusion that the clause is
perfectly adequate in that respect, because the earlier parts of the clause
confine the total rack-rents actually agreed or covenanted to be paid for the
first specified period or any part or parts thereof. That deals with actual
rents which have been recovered in respect of that period.
We now come to
the case of periods in respect of one or more of these shops where there is no
rent either paid or covenanted to be paid. That is dealt with in subpara (b).
(b) Notional rents for any part or parts of the
demised premises for which no Rack Rent shall be agreed or covenanted to be
paid to the Company in respect of any part or parts of the First Specified
Period every such notional rent to be deemed to be payable in respect of all or
such part or parts of the First Specified Period as no Rack Rent shall have been
agreed or covenanted to be paid to the Company for such part or parts of the
demised premises and the amount of such notional rents shall either be agreed
in writing between the Corporation and the Company or in default of such
agreement shall be ascertained by a Formal determination and so that in either
case the said amount thereof shall be calculated by reference to the Rack Rents
agreed or covenanted to be paid during such time as aforesaid to the Company
for other parts of the demised premises which shall be similar to the part or
parts for which such notional rent shall require to be ascertained.
Thus the
valuer or surveyor there has to put a notional rent on the parts which were
empty for longer or shorter periods in respect of any shops, and, of course, he
has to hand a set of comparables in the underlettings of the other shops.
The third
element of the basic rent is an additional rent in respect of any fine or
premium which had been paid. I think on the facts of the case only the first
two are material.
I now move to
the next and final one of these definitions, and again it is an important one.
‘Average Rack
Rent’ for any specified period means a yearly rent for the demised premises
equal to one twenty-first part of the aggregate of the rents for the demised
premises for the Specified Period in question (or in the case of the Final
Specified Period one thirteenth part of the aggregate of the rents for the
demised premises for such Specified Period) estimated and computed under the
provisions hereinafter contained in sub-clause 2 (e) of this clause.
We now come to
the operative part of the clause, which says:
(2) The following provisions shall apply and have
effect for ascertaining the Basic Rack Rent and the Average Rack Rent.
The reason for
that is that they are two contrasting rents. Basic rack-rent, as we have seen,
is found by getting at a yearly rent by totting up all the rents which have
been received and finding a notional rent for those that do not have a rent and
so on, and then dividing the whole by 21 for that period. The average rack-rent
is looking to the future and finding a 21st part of an estimated sum. The first
three paragraphs of this — (a), (b) and (c) — deal with the machinery for
ascertaining the basic rack-rent. As I have said, there is no dispute and I do
not propose to read those out. There is a provision for the disclosure by the
company to the corporation, as landlord, of all the underleases and so forth
and for statements by the secretary of the company or the company’s solicitor
to support and verify the disclosure. Then the parties are to try to reach
agreement on what these rents are; if not, they will have to be ascertained by
a formal determination. Then, once the basic rack-rent has been ascertained the
parties seal the appropriate memorandum on the lease. Then the basic rack-rent
is important in this sense. Once the calculation has been done it continues for
the rest of the lease. It is a benchmark for all subsequent reviews through the
century.
Subpara (d) is
a similar provision for discovery for the next period. The company is required
to disclose all subsisting underleases and tenancies which reach into that
period. Again I do not think I need read it out verbatim.
I now come to
subpara (e), which is the critical paragraph for this application. It is in
three parts. The first part is as follows:
Forthwith
after the delivery by the Company to the Corporation of the particulars
required by paragraph (d) hereof there shall be ascertained either by agreement
in writing for this purpose being made between the Corporation and the Company
or in default of such agreement by Formal Determination an estimate of the
Average Rack Rent which should be obtainable by the Company for the demised
premises during the then current Specified Period under the prices and
conditions prevailing in the property market at the date of such agreement or
determination as aforesaid if every part of the demised premises were to be
underleased or subject by the Company at a Full Rack Rent for the whole of the
then current Specified Period . . .
Thus the first
part requires an estimate of the full rack-rent. Now to the second part, which
takes the form of a proviso qualifying the first part:
Provided that
in making such estimate whether by agreement or by a Formal Determination every
Rack Rent payable under any such underlease or tenancy agreement as aforesaid
— then there
follows a passage to deal with cases of premiums which I propose to miss out —
shall be
treated as conclusively determining the Full Rack Rent for the part of the
demised premises contained therein during the then unexpired residue of the
term of years thereby demised or agreed to be demised.
Then we come
to the third part which has the effect of being a proviso on a proviso. It
takes out something which would otherwise be within the first proviso. It takes
it out so that the case has to be dealt with under the first part of the
clause. The second proviso reads:
Provided
always that where any part of the demised premises is let to or occupied by a
subsidiary or associate Company of the Company the rent (if any) payable by
such subsidiary or associate Company shall not be treated as the Rack Rent for
the part of the demised premises so let or occupied but the Rack Rent of any
part so let or occupied shall be for the purpose of this
writing between the Corporation and the Company or in default of any such
agreement shall be decided by a Formal Determination.
I will come
back in a moment to that para (e), but just to finish the clause, subpara (f)
deals with the consequence of the estimates and determination.
(f) If and so often and for so long as the amount
of the Average Rack Rent for any specified period (other than the First
Specified Period) estimated under the last preceding paragraph hereof shall be
more than the Basic Rack Rent then the Company shall pay to the Corporation in
addition to the rent hereinbefore reserved a further yearly rent (hereinafter
called ‘the Ground Rent increase’) for the demised premises during such current
Specified Period of such sums as may be equal to one fifth of the amount by
which such estimated Average Rack Rent as aforesaid shall exceed the Basic Rack
Rent.
That is the
covenant which gives an uplift to the rent of £9,000. One sees that it operates
by deducting the basic rack-rent from the average rack-rent. Then, finally, (g)
I need not read out. It is a provision for recording the agreement of the
parties.
My impression
of the lease is that it was an extremely well-drawn document, but what has
happened is that it has failed completely to contemplate that underleases would
contain review provisions of greater frequency than 21 years. That is the
simple fact that has brought these proceedings before me, because, as I have
indicated earlier in this judgment, that is now the norm in relation to the
shop premises which comprise this property and the underlettings which have to
be looked at to arrive at average rack-rent.
Mr Jonathan
Gaunt QC, for the landlord, puts it this way. In order to accommodate that
development, if you have an actual underlease which has the relevant terms
about outgoings, repairs and insurance with rent reviews then the valuer must
estimate the likely growth rate of that rent and add it into the total. He
concedes that that is a difficult task, but not an impossible one and not
beyond the skill of professional valuers to accomplish. That is a brief summary
of an interesting and cogent argument. In developing his argument Mr Gaunt
points to certain features in the wording of the clause which I have read out,
particularly the word ‘estimate’. That is the operation on which the valuers
are embarked. He stresses the need to look at the whole of the specified
periods, whether the first period of the later periods. In the case of the
first period one has to look at the whole of it and divide the aggregate rents
by 21. Therefore the same operation should operate and should take place in
respect of the future period, although of course you can only estimate there;
you do not know what is going to happen. Looking at the first proviso, one must
take account of every rack-rent, and although according to the definition
rack-rent would seem to be an ascertainable rent, to be fair, if one is going
to operate the proviso and you had an underlease of one of the shops current
through the entire period, well then it ought to include the rent which is
payable on review and that would have to be valued, so that rack-rent in the
proviso includes rent payable on review. He points out that if one merely
looked at the beginning of the period and looked around at the rents that were
then current and then estimate those in respect of properties that were void at
that time, that would go right against the idea that there should be an average
rack-rent divisible by 21. It would be much simpler then to say that you just
take the rents that are passing at the time of the review and compare them with
the rents in the 21st part of the basic rent.
Mr David
Neuberger QC’s argument for the tenant latches closely on to the wording of
clause 4. He notices that the estimate in 4 (e) is the rent which should be
obtainable by the company under the prices and conditions prevailing in the
property market at the date of such agreement or determination as aforesaid,
and, if a valuation has to be done, one values the rents current at that time.
A surveyor is not an expert in economic macro forecasts, but is a surveyor
specifically chosen because of his expertise in the valuing of shop properties.
Then, under the first proviso, applying it literally, you look at the rack-rent
payable under any underlease current at the time the estimate is made and
regard that as conclusively determining the full rack-rent for the entirety of
the residue of the term of years demised by such underlease. There is
considerable force for that in the wording of the first proviso. The
consequence is that one would ignore rent reviews in the case of current
lettings at the time of the review date.
That is just
the barest summary of the careful arguments that have been presented to me. I
must say I do not find either approach wholly satisfactory. We are not
concerned here to determine the rents payable under the underlease, but we are
concerned to determine the rent payable under the headlease by reference to
those in the underleases. Those underleases are not in the control of the
landlord. For the basic rent, about which there is no controversy, the whole of
the 21-year past period is taken and the rents are all added up. That works in
the tenant’s favour. If one simply took the opening rents at the beginning of
the lease, and there would be some sense in doing that, then that would be more
favourable to the landlord in the vast majority of cases, because that would
result in a lower base figure seeing that during a 21-year period rents are
expected to rise. If that is so, in fairness to the landlord one would expect
that to be balanced by taking the whole of the next 21 years, and, indeed, that
is what the parties have tried to do. One only has to look at the definition of
average rack-rent to see that that is so, because that is defined as a yearly
rent for the demised premises equal to one 21st part of the aggregate of the
rents estimated to be obtained during the whole of the specified period in
question from all the shops.
The first part
of the clause requires an estimate of the average rack-rent which should be
obtainable by the company during the then current specified period under the prices
and conditions prevailing in the property market at the date of such agreement
or determination as aforesaid if every part of the demised premises were to be
underleased or sublet by the company at the full rack-rent for the whole of the
then current specified period. That is not referable to any rent actually being
obtained, but is purely hypothetical. Having regard to the definitions of
average rack-rent and full rack-rent, which in turn incorporate the definition
of rack-rent, that would, to my mind, inevitably result in an aggregate fixed
rent for each of these shops throughout the entirety of the term. So that what
the valuer is required to do is to value the rent on the basis of a 21-year
non-reviewable rent for the specified period at the time of ascertainment. That
is supported by the fact that what he is directed to is the rack-rent which
should be obtainable under the prices and conditions prevailing in the property
market at the date of such agreement or determination. The only way I can make
sense of that is that he has to determine the full rack-rent for each of these
properties for the 21 years as a fixed unvarying sum.
To grant
leases for 21 years, non-reviewable, is certainly not common and it may not
ever happen in the present state of the markets. Normally, in practice, one now
expects rents to be periodically reviewable. That usually is the wish of both
the landlord and tenants, because unless a premium was going to be paid, an
unreviewable rent for 21 years would naturally at the beginning be pitched far
higher than it would be if there was going to be an initial rent for only five
years, which will then be subject to review at the then market rent. But an
exercise to determine a fixed rent, in my judgment, is what was contemplated when
this lease was drawn up and that provision put in it. The valuer does not have
to forecast what will in fact happen and put a value on it, and it has not been
suggested to me that the estimate of fixed rent is an impossible task for a
valuer to do. That, as I see it, is what is required of the valuer under the
first part of the clause.
One must now
move to the provisos. The first proviso takes certain cases out of the general
direction regarding the estimate. The proviso starts: ‘Provided that in making
such estimate’, those are the opening words, and therefore the operation of
this proviso is something that has to be done at the time of the estimate and
as part of it. In order to take the case out of the first part of the clause
one has to find that there is a rack-rent payable under such underlease or
tenancy agreement as aforesaid. That is quite separate from what was
contemplated in the first part of the clause. We enter the field of actual
rents. One is looking at a rent which is ascertained at the time when the
definition falls to be applied, ie at the time of making the estimate. Thus it
cannot, in my judgment, include a rent which is to be determined on some future
review.
We go on, and
the real difficulty arises from the closing words of the proviso. The rack-rent
payable is to be treated as conclusively determining the ‘Full Rack-Rent’ for
the particular stop ‘during the then unexpired residue of the term of years
thereby demised or agreed to be demised’. On a literal reading that would mean
that once you discover there does exist a rack-rent payable under the lease or
tenancy agreement then that is to be taken by the valuer as determining the
rent for the entirety of the residue of the term of years, albeit that in
virtually every case the rack-rent will be current only for a small period of
years and then some other rent will be reached. This is a case which could not
have been contemplated when the lease was drafted. One might approach this by
saying that the
provisions, because no rack-rent as defined was payable during the residue of
the term but during only part of it. That has some attractions, but the
preferable view, in my judgment, is to limit the operation of the proviso to
that part of the term which precedes the next rent review in the relevant
underlease. Thereafter the shop will be treated as if the lease had expired,
leaving the valuer to estimate under the first part of clause 4 (e) the rent
payable as for a reversionary lease, as he would have to do in relation to
shops where the underleases were going to expire by effluxion of time in any
event.
Taking that
view of the matter, I shall have to hear counsel as to what declarations I
should make in answer to the questions.
