Landlord and Tenant Act 1954, Part II — Determination by court of terms of new lease — Rent payable for basement premises in central London used for car parking — ‘Self parking’ and ‘block parking’ — Expert evidence of rental values by landlords’ and tenants’ valuers — Conditions governing demand for car-parking facilities — Marked divergence between tenants’ proposed rent of £26,500 per annum and landlords’ £50,000 per annum — Judge determines rent at £29,000
Three
summonses were before the court, a summons dealing with a construction point, a
summons concerned with interim rent, and the third and substantive one
concerning the rent payable under the new lease. The premises were in the
basement of Middlesex House, in Cleveland Street, London W1, facing one side of
Middlesex Hospital.
S A Furst
(instructed by A E Hamlin & Co) appeared on behalf of the plaintiffs,
National Car Parks Ltd; G F Laurence (instructed by Bird & Bird)
represented the defendants, Colebrook Estates Ltd.
Giving
judgment, FOSTER J said: In this case I am concerned with premises which are
the subject of an underlease in respect of the basement of Middlesex House,
Cleveland Street, London W1 (which I will refer to as ‘the premises’). The
plaintiffs are the tenants, National Car Parks (‘NCP’) and the defendants ‘the
landlords’.
The
premises:
Middlesex
House consists of a purpose-built multi-storey industrial-type-building of
steel-framed construction with brick elevations, planned as individually
demised floors which are occupied for light-industrial purposes, mainly for
manufacturing purposes in connection with the textile industry. It was built in
1935 and the landlords hold the premises on a 99-year lease from March 25 1977
at a ground rent. The basement was designed as, and subsequently used for, the
purposes of vehicle parking. The building is located on the east side of
Cleveland Street facing Middlesex Hospital and a short distance to the north of
the junction of Cleveland Street and Mortimer Street. Many of the buildings in
the immediate vicinity are occupied by the Middlesex Hospital Medical School
and various ancillary organisations connected with the hospital activities.
Other property in the area is used for the purposes of the textile industry. It
is situate in a busy commercial and business area bounded by Euston Road to the
north, Oxford Street to the south, Tottenham Court Road to the east and Great
Portland Street to the west. It is part of a one-way street pattern developed
in this area to assist traffic movement. This part of Cleveland Street runs
north. The two experts agree that the premises have an area of some 13,650 sq
ft. It is approached by a sharp right turn from the street and then a steep
ramp down, concrete surfaced, at the north of the building and then a sharp right-handed
turn into the basement. The basement floor has a level concrete surface and has
two small self-contained offices. The parking accommodation is in a clear space
save for five rows of concrete-surfaced vertical pillars which contain the
steel grid of the building. These pillars seriously hamper the parking.
There are two
means of parking. One is called self-parking and the other block-parking. In
the first, the driver parks his own vehicle and keeps the keys. Only a few men
are required to take the parking fees on exit. But these premises, because of
the pillars, are operated on a block-parking basis, where the driver stops at
the entrance, hands the car keys to the attendants, who park the car for him
and fetch it when it is wanted, as it may involve moving several other
vehicles. It was agreed that at the premises 90 to 93 cars may be block-parked,
while only some 70 cars might be self-parked. It is, of course, more profitable
to self-park, as it saves the costs of several employee drivers to park the
vehicles.
The
present lease:
This is dated
April 21 1975 and grants NCP an underlease for seven years from December 25
1973 at a rent of £20,000 a year for the last four years. It thus ended on
December 25 1980, and it has been agreed between the parties that the new lease
should commence on March 25 1983 and that the rent payable between December 25
1980 and March 25 1983 should be 90% of whatever rent I should decide should be
payable for a further term. In addition, the parties have agreed:
(1) That the provision that
the NCP should pay a rent of £125 towards a proportion of the costs of
insurance should be a fair proportion, though this provision must contain a
method of deciding what is a fair proportion if the parties disagree;
(2) That whatever the period
of the new lease, there should be a rent review after every five years;
(3) That clause 2(5) which
required the NCP to carry out certain work should be deleted;
(4) That references in the
lease to certain Acts which are now superseded should refer to the present Acts
in force;
(5) That clause 2(8) should
be construed by me and should be expanded in accordance with my decision.
The
outstanding points:
These are:
(1) the duration of the new lease;
(2) the construction of clause 2(8);
(3) the amount of the rent.
The
duration of the term:
It was
originally agreed that the new term should be for 14 years and the landlords’
solicitor swore an affidavit so agreeing. Apparently the landlords now wish to
resile from that agreement as they may wish to redevelop the whole building
after seven years. I think that this difficulty can be resolved by granting a
14-year lease with a provision that the landlords can terminate the lease by
giving a three months’ notice to determine the lease on a quarter day at any
time after the first seven-year period if the landlords wish to demolish or
reconstruct the building. I have power to do this (see McCombie v Grand
Junction Co Ltd [1962] 1 WLR 581).
Construction
of clause 2(8):
The first
three lines of this clause read as follows: ‘Not to use the demised premises or
any part thereof for any other purpose than in connection with the tenants’
business of garage proprietors.’ At
first NCP claimed that the user was limited to car parking, but by a letter
dated August 18 1982 NCP’s solicitors admitted that it must include the sale of
fuel, repairs to vehicles and the sale of, and garaging of, motor vehicles.
This concession seems to me inevitable, but the question which I have to
decide, and which affects the amount of rent payable, is whether NCP could also
carry on the business of car hiring. I have come to the conclusion that in
central London one would not expect a garage proprietor to carry on a car-hire
business, which is carried on solely by specialists such as Godfrey Davis,
Hertz and the like. NCP concedes that if a car-hire firm wished to use the
premises as a place to park and repair its fleet of cars it could do so, but
not the actual place where the documentation for hiring could be carried out. I
agree, and clause 2(8) should be carefully redrafted to take into account these
modifications. Otherwise the terms of the present lease will apply.
The rent:
This is, I
find, a most difficult question. It is governed by section 34 of the Landlord
and Tenant Act 1954, which provides that the rent payable shall be ‘determined
by the court to be that at which having regard to the terms of the tenancy
(other than those relating to rent) the holding might reasonably be expected to
be let in the open market by a willing lessor’, and then there are four
subparagraphs which may be disregarded, since they are not relevant to this
application.
I heard two
expert witnesses, Mr H M Berney FRICS for National Car Parks, and Mr David
Harris, also FRICS, for the landlords. There was, to say the least, a
difference between these two valuations, the former saying the new rent should
be £26,500 and the latter £50,000. The most impressive witness, and, if I may
say so, the only one who had intimate knowledge of the garage business both as
landlord and tenant, was Mr R S Durrant, who was also FRICS, and he has been
estate surveyor to NCP for 13 1/2 years. He gave evidence that the premises
could only be used for block parking and that he had had no demand from any car
hirer for the premises even as a
there were no hotels and few large shops. It was only used by local workers in
a very congested one-way street and the ramp made it difficult for two-way
driving through it, though it was possible. In fact the parking at the premises
was only open from 8 am to 9 pm for five days a week. I cannot think that he
would not have put the premises to better use if there was any demand. Mr
Harris’ estimate is, in my judgment, based on the premise that the premises
could be better used than at present. In his report he says this: ‘The type of
business which now requires such a full garage use in central London includes
such as car-hire businesses, car concessionaires, taxi service, a business or
public body operating a fleet of vehicles (the GPO, the police etc).’ The comparables produced by both experts are,
in my judgment, in no way comparable. There seems to be a ridiculous idea that
in W1 one is in central London and the conditions are the same throughout.
Nothing could be more untrue. Mr Harris would compare the premises with
premises at Marble Arch and at Kingston House North in SW7. In any event, they
are all self-parking and it is like comparing chalk with cheese. Mr Berney
produced three comparables which are equally totally different. First, the
rents were all fixed as long ago as 1979 and, again, the first and third are
self-parking and the second is block and self-parking. I am sure that NCP would
not use the premises as block parking if there was a way more profitable to use
it. As for car-hire firms taking the premises to garage and repair their fleet
of cars, the premises are too near the centre of London and they look for
premises further out which are cheaper, retaining only a few cars at their
office for immediate hire. Mr Berney arrives at his figure by applying £2 per
sq ft per annum. Mr Harris arrives at his value by applying a sum per annum per
car space.
I cannot think
that either of these approaches can be right in this particular case, since
there are no comparables. I would prefer to apply the general increase in rents
in the area, which varied between 10% and 15%. I will take 20%. This means that
if the rental on December 25 1980 was £20,000, on December 25 1981 it would be
£24,000 and on December 25 1982 it will be about £29,000, and in my judgment,
and having taken 20% rather than 15% for a five-year period, £29,000 per annum
would be a rent which, in my judgment, might reasonably be obtained in the open
market.
Conclusion:
The landlords
and the NCP have taken up and frequently changed their positions, so that I
wish to see the final draft of the lease. I direct that NCP’s counsel should
draft a new lease in accordance with this judgment and that the landlords’
counsel should, if possible, approve it. In any event, I wish to see the final
draft, whether agreed or not, to approve or settle the final draft. It can be
mentioned to me at any time, but let it be this term.
The
plaintiffs were awarded two-thirds of their costs.
