Landlord leasing property for 120 years – Rent to be reviewed every 20 years and determined by formula – Formula calculating rent by reference to rent paid by subtenant – Property not sublet – Whether lack of prescribed numbers prevented use of formula – Whether fair rent should be implied – Formula to be used using notional rent
The plaintiff landlord entered into a lease with a tenant of premises comprising two acres of land at London Road, Coventry. The lease was dated October 19 1972 and was for a term of 120 years with a rent review every 20 years. In the second schedule of the lease the rent for the first 20 years was to be £6,250 and each 20 years thereafter was to be agreed by the parties or, in default of agreement, was to be a yearly rent of £6,250 divided by the initial rent received by the tenant from its subtenant and multiplied by the rent to be paid by such subtenant or its successors in title at the date of such revision. The schedule further stated that if there were any difference between the parties the matter was to be referred to a member of the RICS.
The original tenant assigned the lease and as a result of other assignments it became vested in the defendant. The property was never sublet. By 1992 no rent had been agreed for the second period of 20 years of the term. The plaintiff sought a declaration contending that the formula was no more than a guide and so the lack of the prescribed quantities did not prevent a rent being determined. In the alternative, it was contended that if the formula could not be used, a fair rent term had to be implied. The defendant contended that the formula was inapplicable because it had never received any rent, there had been no subtenant to pay rent and that therefore the rent under the lease remained the yearly rent of £6,250.
Held The matter was referred to a member of the RICS.
1. The lease had not provided for the yearly rent of £6,250 to be paid in the events which had occurred, and it was not appropriate to imply the term that a fair rent was to be paid as the second schedule provided for a geared rent, which was not the same as a fair rent which would be a fair ground rent.
2. In the circumstances, it was appropriate to refer the matter to a member of the RICS to be appointed pursuant to the provisions of the second schedule. Although such an expert did not have decision-making authority under the lease to decide how the reviewed rent was to be decided in the absence of subletting, he could apply the formula by using a notional rent under a notional sublease.
3. The notional initial rent was the full rack-rent which the tenant could have obtained under an initial sublease complying with the requirements of the lease. The notional rent at the date of the revision was the full rack-rent which the defendant could have been paid under a sublease complying with its requirements.
John Furber QC and Jonathan Karas (instructed by Wright Hassall) appeared for the plaintiff; Daniel Pearce-Higgins (instructed by Eversheds) appeared for the defendant.
