Landlord and tenant – Business premises – Rent review – New business tenancy requiring payment of open market rent – Parties asking court to determine rent – Whether judge failing to take account of relevant factors in determining rent – Appeal allowed
The appellant landlord owned business premises comprising three ground-floor lock-up shops. The property had been originally subject to a lease from November 1985 for a term of 10 years at an annual rent of £2,250 for the first five years, subject to a review for the last five years.
The lease was assigned to the respondent tenant in 2000. On review the rent was increased to £6,250 with effect from November 2000. With effect from December 2001, the annual rent was negotiated at £7,500. The parties were agreed on all the terms of a new lease from November 2005, save for the annual rent. The court was asked to determine the rent at which, having regard to the terms of the tenancy, the holding might reasonably be expected to be let in the open market by a willing lessor, pursuant to section 34(1) of the Landlord and Tenant Act 1954.
Since the judge had been asked to decide the market rent on the renewal of the business tenancy, he heard evidence from two expert valuers. They agreed that rents had increased in the area, but they could not agree on the amount of the new rent for the property in question. However, the judge concluded that the rent should be £3,937.50 for the first five years of the new lease.
The appellant appealed, contending that the judge had been unintentionally misled about how the passing rent of £6,250 had been reached. He had been mistaken in thinking that the respondent had taken an assignment of the old lease in August 2000 and that a separate review of the rent had taken place in November 2000, under which the annual market rent increased by £1,000. The appellant argued that, in fact, one transaction agreed on 15 August 2000, with an assignment and rent review effective from November 2000. Thus, the passing rent of £6,250 was the market rent as at November 2000 and should have been the starting point for assessing the market rent in 2006; alternatively, it was a highly relevant factor in assessing the market rent.
Held: The appeal was allowed.
The judge had been clearly wrong to leave the passing rent of the property out of account on the basis that there was no evidence of the circumstances in which it had been negotiated in the past. Similarly, he had wrongly left out of account the rent of a comparable adjoining property as of little or no relevance, there being no evidence as to the circumstances in which the rent had been determined.
The rents under the current lease and of the adjoining property were relevant valuation evidence of market rent of the property. There was no need for the court to require the party relying upon those rents to produce positive evidence of the circumstances in which they had been determined. It was for the party challenging the relevance of the passing rent and/or the rent of the adjoining property to adduce evidence of the circumstances on which it relied to show that the rents were not relevant factors in determining the open market rent.
In the present case, the respondent had failed to adduce any such evidence. Thus, the matter would be remitted to the county court to determine the market rent of the property.
Howard Lederman (instructed by Black Graf & Co) appeared for the appellant; Gary Blaker (instructed by Shah & Burke) appeared for the respondent.
Eileen O’Grady, barrister