Open market rental value — Subject premises extension to hotel — Plaintiff tenant holding lease of hotel — Access from adjoining hotel — User restricted to extension to hotel — Whether plaintiff tenant a potential bidder in the open market — Declaration to that effect
By a lease dated May 16 1962 the plaintiff tenants hold a term of the Greyhound Hotel, Croydon. By a further lease dated October 7 1969, the reversion to which is owned by the defendant landlords, the tenants hold a term of adjoining premises at 46/48 St Georges Walk. These premises were demised as an extension to the hotel from which access is obtained; the 1969 lease restricting the user to use as a high class public house or such other purpose as the lessors shall from time to time agree to.
By the rent review provisions of the 1969 lease, the rent at review is defined as the best rent which might be obtained in the open market on the assumption of a willing tenant and a willing landlord. It was agreed for the purposes of the review arising on December 25 1989 that the premises demised by the 1969 lease could only be used as an extension to the hotel. The tenants sought a declaration, inter alia, that the arbitrator was to assume that the plaintiffs were not potential tenants in the hypothetical market for the extension and that the market was restricted to hypothetical tenants prepared to risk obtaining the consent of the owner of the adjoining hotel to use the premises as an extension to the hotel.
Held The arbitrator is required to assume that the plaintiffs are potential hypothetical tenants in the hypothetical open market for rent review purposes. But the arbitrator is entitled to find as a fact that the lessee of the adjoining hotel, whoever he might be, would be a potential tenant of the extension. It is for the arbitrator to say what effect that fact, if found, would have as between a hypothetical willing lessor and willing lessee negotiating the terms of the hypothetical lease.
F R Evans (Leeds) Ltd v English Electric Co Ltd (1977) 245 EG 657; Inland Revenue Commissioners v Clay [1914] 3 KB 466; and Vryicherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatan [1939] AC 302 considered.
Christopher Lockhart-Mummery QC and John Male (instructed by Paisner & Co) appeared for the plaintiffs; and Kim Lewison (instructed by Brecher & Co) appeared for the respondent.
