Landlord and tenant — Rent review — Construction — User covenants in lease — Issue for court in course of arbitration — Problems caused by user covenants containing a special provision applying to the tenant personally — Whether landlord had an unqualified right to prohibit use as a club by assignees and others or whether, although landlord’s consent was required, it could not be unreasonably withheld — Declaration in latter sense granted
this case, for a term of 16 years, was of a basement and sub-basement in Regent
Street, London W1 — The lease contained rent review provisions and the
hypothetical tenancy assumed for review purposes incorporated covenants
restrictive of user — In the course of an arbitration an issue arose on
construction and the determination of the court was sought — In the user clause
the tenant covenanted not to use the property for any of a number of
objectionable purposes or to hold a sale by auction on the premises — The
clause went on to provide that the tenant, defined for this purpose only as
James Hector O’Brien (the defendant) personally, should be entitled to use the
property as a club — The clause then provided that ‘no other trade or business
shall be carried on upon the property, or any part thereof, without the consent
in writing of the landlord, which consent shall not be unreasonably withheld’
the court was whether, on the true construction of the relevant clause, the
landlord had the unqualified right to prohibit use as a club by assignees,
sublessees or licensees of the demised premises or whether, although the
landlord’s consent was required for such use, his consent could not be
unreasonably withheld — The landlord, the plaintiff in the action, sought to
establish the wider right of user on the part of the tenant and any assignee,
lessee or licensee and the qualified right of the landlord to object to such
use — This interpretation would be calculated to increase the rack rental value
of the premises — On the other hand the defendant tenant argued in favour of
the unqualified right of the landlord to prohibit any such user by anyone other
than the original tenant, the defendant himself; such an interpretation would
be likely to reduce the rack rental value
no doubt that the construction advanced by the landlord was correct — He could
not accept the contention that the special provision which granted the
defendant, James Hector O’Brien, personally the right to use the premises as a
club precluded by implication any use of the club by anyone else — Consent
would be required by such use by others, assignees, sublessees or licensees,
but such consent could not be unreasonably withheld
accordingly granted the declaration sought by the landlord but with the
addition that the consent of the superior landlord was also required
No cases are referred to in this report.
This was an originating notice of motion
before Mr Gavin Lightman QC, sitting as a deputy judge of the Chancery
Division, raising a question of construction of user covenants in a lease. The
issue had arisen in the course of an arbitration, which had been stayed pending
the court’s determination. The lease was of a basement and sub-basement at
189-191 Regent Street, London W1.
Jonathan Ferris (instructed by Lovell
White Durrant) appeared on behalf of the plaintiff; Kim Lewison QC (instructed
by Field Fisher Waterhouse) represented the defendant.
Giving judgment, MR GAVIN LIGHTMAN QC
said: There is before me an originating notice of motion raising a short
question of construction of a user covenant in a lease. The issue arose in the
course of a rent review arbitration and the arbitration has been stayed pending
the determination of this question.
The lease is dated July 24 1986 and is
made between Greenhaven Securities Ltd and Mr J H O’Brien. The lease is of a
sub-basement and basement at 189-191 Regent Street, London W1, for a term from
June 24 1986 to June 23 2002. The rent is £22,000 pa, subject to review, and
the relevant rent review date is June 24 1990. Clause 6 of the lease provides
that:
As from the rent review date, the rent
shall be the rack rental value of the property, determined by arbitration. The
rack rent value for this purpose means the best yearly rent at which the
property might reasonably be expected to be let in the open market on the
relevant review date, on the assumption that the property is available to let
by a willing landlord to a willing tenant, without a premium, and with vacant
possession, and subject to the provisions of the lease.
The provisions of the lease include
covenants restrictive of user and hence the question of construction of the
user covenant arises.
The user covenants contained in the lease
are as follows. Clause 4(18):
The tenant covenants not to use the
whole, or any part of, the property, (1) for any illegal or immoral purposes;
(2) for any offensive, noisy or dangerous trade, business or manufacture; (b)
not to allow any person to reside, or sleep, on the property; (c) not to hold
any sale by auction on the property; (d) so long only as the term hereby
created shall be vested in the tenant (meaning in this subclause James Hector
O’Brien personally) that the property shall be occupied by him personally, and,
provided all necessary consents have been obtained from the Local or other
competent authority, and the superior landlord, that are subsisting, the tenant
(meaning in this subclause James Hector O’Brien) shall be entitled to use the
property for the purpose specified in item 7 of the particulars; (e) no other
trade or business shall be carried on upon the property, or any part thereof,
without the consent in writing of the landlord, which consent shall not be
unreasonably withheld.
Item 7 of the particulars reads as
follows:
The permitted use. A club, providing
facilities for the consumption of food and intoxicating and other drinks,
dancing and entertainment during such hours as shall be permitted by the
Commissioner of Police, or other competent authority, subject to the provisions
of clause 4(18)(d) and 4(33) hereof.
Clause 4(33), which is a tenant’s
covenant, reads as follows:
To carry out and comply with the
obligations and restrictions deriving from the superior lease, or relating to
the freehold title of the building, which are set out in a second schedule to
this lease, except insofar as the superior landlord shall have granted a
written waiver of any such obligations or restrictions.
Going to the second schedule, covenant
11, so far as material, reads as follows:
The said premises will not be used for
the sale of wines, beer or spirits, or any of the following trades or
businesses
–and then certain are specified–
or for any other noisome, noisy or
offensive trade or business, and that no part of the said premises shall be
used as or for a place of public entertainment, without, in all such aforesaid
cases, the previous consent in writing of the landlord being obtained.
The only other clause I should read is
clause 4(10), which is the assignment covenant and reads as follows:
The tenant covenants not to assign,
underlet or part with the possession of part only of the property, or share the
possession or occupation of the property, nor allow any person deriving title
from the tenant to do so; (b) not without the landlord’s previous written
consent, which consent shall not be unreasonably withheld, to assign, underlet
or part with possession of the property as a whole, or allow any person
deriving title from the tenant to assign, underlet or part with possession of
the property as a whole.
The critical issue between the parties is
whether, upon the true construction of clause 4(18), the landlord has the
unqualified right to prohibit use as a club by assignees, sublessees or
licensees of the demised premises that is to say, any person other than the
original tenant, Mr O’Brien or whether, although his consent is required to
such user, his consent cannot be unreasonably withheld.
The landlord (the plaintiff in this
action) seeks to establish the wider right of user of the tenant and any
assignees, lessees or licensees of the premises, and the qualified right of the
landlord to object to such user, since such a construction must be calculated
to increase the rack-rental value of the premises. On the other hand, the
defendant tenant seeks to argue in favour of the unqualified right of the
landlord to prohibit any such user by anyone other than the original tenant, Mr
O’Brien, since such a restriction in the lease must be calculated to lower the
rack-rental value.
The critical word in clause 4(18)(d) is
the word ‘only’, and the critical word in clause 4(18)(e) is the word ‘other’.
Mr Ferris, for the plaintiff, has argued that clause 4(18)(d) confers on Mr
O’Brien personally the right to use the premises as a club, but only so long as
the conditions there stipulated are satisfied. Clause 4(18)(e), in requiring
consent not to be unreasonably withheld for any other trade or business,
requires consent for any trade or business other than the business to be
carried on personally by Mr O’Brien under (d). If any person other than Mr
O’Brien is to carry on the business of a club, this will be another business or
trade falling within (e), to which the landlord has only a qualified right to
refuse consent. Mr Lewison, for the tenant, argues that clause 4(18)(d) not
merely grants to Mr O’Brien the right, or entitlement, to use the premises as a
club, but, by implication, precludes any use of the club by anyone else. He
focuses on the word ‘only’.
If clause 4(18)(d) does regulate use as a
club, both by Mr O’Brien and everyone else, then in clause 4(18)(e) the words
‘no other trade or business’ may readily be construed as excluding from its
ambit altogether ‘use as a club’, which is comprehensively regulated by clause
4(18)(d).
Short, but effective, arguments were
addressed on both sides, but I have no doubt that Mr Ferris is correct. I
cannot read clause 4(18)(d) as applicable, or regulatory, of use of the
premises by anyone other than Mr O’Brien. I cannot read into it any implied
prohibition on use of the premises as a club by anyone else. The clause does
not say that the premises may only be used as a club so long as the conditions
stipulated are satisfied. It says that Mr O’Brien’s entitlement to use them as
a club shall only subsist as long as the conditions as stipulated are complied
with. On his entitlement coming to an end, clause 4(18)(d) falls away and all
the rights of user are regulated by clause 4(18)(e).
Supposing Mr O’Brien wished to continue
use as a club but did not want to occupy the property personally. He would, in
my view, require consent for such user under (e), and such consent could not be
unreasonably withheld. Likewise, consent would be required for such user as a
club by any assignee, sublessee or licensee, and, under (e), such consent could
not be unreasonably withheld.
In short, I read (d) as having, and being
intended to have, the legal effect of a written consent given to Mr O’Brien
personally under clause 4(18)(e).
I would add that my conclusion is
reinforced by considerations of business common sense and the scheme of the
lease. I cannot believe that the parties can have intended these premises to be
available during the occupation of Mr O’Brien as a club but that that specific
use should be totally banned thereafter. The lease itself, at the very least,
is consistent with such user subsisting throughout its term. The landlord is
sufficiently protected by the provision requiring his consent, such consent not
to be unreasonably withheld, to use as a club by anybody other than the
original tenant.
I am so clear in my own mind on the
construction, that I need not add anything further in this regard.
I will, accordingly, grant the
declaration sought but with the addition that this user will also require the
consent of the superior landlord.
The defendant was ordered to pay half the
plaintiff’s costs.
