Business lease – Public house – Rent review – Valuation of “site comprised in” demised premises – Judge holding land only to be valued disregarding existence of building – Whether sufficiently clear indication to displace presumption that whole of demised premises to be valued – Appeal dismissed
The appellant was the landlord and the respondent was the tenant under a lease of a public house in Highgate, London, for a term of 90 years from November 1978. The lease had originally been granted by the local authority pursuant to an agreement for lease under which the tenant was required to construct the public house. The initial rent was £2,500, with a provision for rent review every 10 years. Following a review in 1998, a dispute arose between the parties regarding the basis upon which the premises were to be valued. The lease provided that the rent was to be the higher of the current rent or the open market rental value, the latter being defined as the annual rental value that “the site comprised in the demised premises” might be expected to fetch if let on similar terms to the existing lease.
The respondent brought proceedings in which it contended that the phrase “the site comprised in” indicated that the valuation was to be of the land only, not land and buildings. It submitted that because the consideration for the grant of the lease had been the expense incurred in constructing the pub building, it should not have to pay for that building again by way of rent. The appellant argued that there was a presumption that the entire premises, comprising both land and buildings, were to be valued unless there was a clear indication to the contrary. It submitted that the phrase relied upon by the respondent was not a sufficiently clear indication because it conflicted with other lease provisions that presupposed the existence of a building. Those included: (i) the parts of the rent review provisions that dealt with the assumptions to be made and the matters to be disregarded on valuation; and (ii) the provisions for the determination of the rent, in the event of a dispute, by a surveyor specialising in the valuation of premises used for similar purposes to those of the demised premises. Ruling in favour of the respondent, the judge held that the land only was to be valued as a vacant site. The appellant appealed.
Held: The appeal was dismissed.
The starting point for resolving the dispute was the terms of the lease and the general rule that the rent would ordinarily be expected to be for the whole of the premises in the absence of a clear indication to the contrary: Braid v Walsall Metropolitan Borough Council (1999) 78 P&CR 94 applied. Although the agreement for lease formed part of the factual matrix against which the lease fell to be construed, the mere fact that the tenant had paid for the construction of the premises was not sufficient on its own to support the respondent’s interpretation of the lease. However, the phrase “the site comprised in” was not standard wording and must have been included for a reason, namely that the land without the buildings was to be valued. The lease was not well drafted and, to the extent that that provision conflicted with others in the lease, the conflict was to be resolved in its favour because greater weight was to be given to its specific, non-standard wording than to standard clauses included without the realisation that they might have to be modified in the light of the negotiated aspects of the rent review machinery.
However, the judge’s decision would be varied to the extent that the land should be valued not as a vacant site but on a notional ground-rent basis. This was on the assumption that the demised premises were as they stood, with a building, but the effect on the rental value of that building’s existence would be disregarded.
Guy Fetherstonhaugh QC and Elizabeth Fitzgerald (instructed by Rossides Caine) appeared for the appellant; John McGhee and Ciaran Keller (instructed by Eversheds) appeared for the respondent.
Sally Dobson, barrister
