Plaintiff tenant seeking construction of rent review clause — Rack-rental value — Whether ceiling on rent — Underleases — Whether decision not to review rent in light of falling market constitutes “review” — Declarations for tenant
The lease was made between the defendant landlord (“Drapers”) and the plaintiff tenant (“GRE”) on June 21 1974 for land and buildings at 13-21 Eastcheap and 10 Talbot Court, London EC3, for a term of 80 years. The lease reserved the rent specified in the second schedule to the lease to be paid during an initial period and for later reviews of the rent. The parties varied the terms of the rent review provisions by deed to be reviewed with effect from March 25 1983 and each fifth anniversary of that date.
By clause 3 the yearly rent “shall be subject to increase (but not decrease)”. Clause 4 stated that: “PROVIDED ALWAYS that notwithstanding anything to the contrary herein contained the full annual amount of the rent payable by the tenant …as from … date of review shall never exceed one half of the rack rental value as ascertained in respect of such date of review”. Clause 5 provided that the rack-rental value meant the best yearly rent at which the premises could be let on the open market with vacant possession. With regard to the underleases, the annual rents were to be taken to be the rack-rental value of the premises, “last reviewed not more than one year before the relevant date of review”.
The tenant sought declarations from the court that: (1) the rent, with effect from March 25 1993, should not exceed one-half of the rack-rental value whether that sum was more than — or less than — the current rent; and (2) on the true construction of the lease none of the annual rents in the underleases was last reviewed in the specified period so that those rents were not to be taken to be the rack-rental value for the purposes of the second schedule.
Held Declarations for the tenant.
1. The issue was to be determined by the terms of the lease and the court accepted that it was dealing with “one-off” drafting. The code for an increase was provided for in clause 3 and the ascertainment machinery envisaged in clause 5 was to be triggered by the landlord.
2. If the landlord was to misread the market so that the intention to increase had in effect triggered a reduction, then the provisions of clause 4 came into play. Conflict was provided for and clause 4 emerged as the victor. In other words it provided a ceiling and gave practical effect to the review machinery of the other clauses.
3. The court was not prepared to accept, therefore, that the whole of the lease was subject to an increase and not a decrease and that it was necessary to construe the totality of the clauses in order to achieve harmony between them. The opening words of clause 4 overrode the other wording by compelling and clear language.
4. GRE had considered the question of the rent review of the underleases and had decided that it was fruitless to go through that process in the current market. The question was therefore whether that sufficed to constitute a “review”.
5. “Mere reconsideration” were not words used in a business arrangement. “Reviewed” meant that there was machinery for review and that had either been triggered or had been treated by the parties as triggered so that there was a completed review.
Paul Morgan QC (instructed by Frere Cholmeley Bischoff) appeared for the plaintiff tenant; David Neuberger QC and Stephen Jordan (instructed by Denton Hall) appeared for the defendant landlord.
