Rent review — Hypothetical lease — Underlease varied by two deeds — Whether variation binding on successors in title — Whether hypothetical lease reflects terms as varied — Hypothetical term — Appeal dismissed
The appellants are the underlessors in respect of premises at 52 King’s Road, Chelsea; the respondents are the underlessees by assignment of a 15-year term granted by the appellants in August 1978. The underlease contains provisions for the rent to be reviewed; the last two reviews being in respect of the periods commencing in August 1987 and August 1990 respectively. The review rent is to be “the fair market rent of the demised premises at the commencement” of each review period, assuming a letting on the same terms as the actual lease.
Clause 2(11)(a) of the underlease contained provisions relating to the user of the premises: there was an absolute prohibition against certain uses of a nuisance nature; the premises were restricted to use as a wine and snack bar; the landlord would not unreasonably withhold consent to a variation; and there was a prohibition on competing uses or uses prohibited by the superior lease.
The underlease was subject to two deeds of variation; one in 1981 which related to assignment, increased the rent, and varied the user clause; and the second in 1986 which concerned the assignment to the present respondents, permitted the restaurant use proposed by the respondents (but otherwise omitted any reference to the already amended user clause) and contained covenants by the assignee not to use the demised premises otherwise than as permitted.
At first instance Warner J made declarations in respect of two questions arising as to the meaning of the hypothetical lease for rent review purposes (see [1989] EGCS 63).(1) The 1986 deed was, by virtue of section 79 of the Law of Property Act 1925, binding on successors and its restrictive effect in removing the possibility of the lessors’ consenting to a variation of user had to be taken into account at a rent review. (2) The hypothetical term was for the unexpired residue of the term of 15 years from August 1978.
Held The appeal was dismissed.
(1) The variation introduced by the deed of 1986 had the effect of removing the proviso that the lessors’ reasonable consent to a variation of user was required. The 1986 deed bound successors in title to the present appellants. (2) The hypothetical term was a term of 15 years from August 22 1978. The guidelines in Basingstoke and Deane Borough Council v Host Group Ltd [1987] 2 EGLR 147 applied: the court should look at the underlying purpose of a rent review clause. Datastream International Ltd v Oakeep Ltd [1986] 1 EGLR 98 was also referred to and provided that a tenant should not be required to pay for something he was not to have.
Gavin Lightman QC and Justin Fenwick (instructed by Oswald Hickson Collier & Co) appeared for the appellants; and John Dagnall (instructed by Fuller Buckley, of Cobham, Surrey) appeared for the respondents.
