Landlord and Tenant Act 1954, Part II — Terms on which new lease of gentlemen’s hairdressing premises should be granted — Landlords’ appeal against county court judge’s decision — Decision challenged on the ground that there was no evidence to justify it — Various issues had been raised as to the quantum of rent, namely, whether the appropriate approach was a ‘global’ approach or by a zoning method, what ‘comparable’ should be used, whether an ante-room should be in zone A or lower zone B, and what effect on rent resulted from landlords’ proposal, after the case was called on, to substitute a 7 years’ for a 10 years’ term — Criticism of judge’s decision and reasoning rejected — There was evidence on which the judge was entitled to arrive at his conclusions — Landlords’ appeal dismissed — Some discussion of valuation submissions
This was an
appeal by the landlords, Howard De Walden Estates Ltd, from a decision of Judge
Honig at Bloomsbury and Marylebone County Court on an application for a new
lease by Vincenzo Turone and Carlo Barbato, tenants of premises at 1a Moxon
Street, London W1, used as a gentlemen’s hairdressing establishment. Judge
Honig fixed the rent for a new tenancy of seven years’ duration at £2,550 per
annum, with an interim rent of £2,400.
N Patten
(instructed by Baileys, Shaw & Gillett) appeared on behalf of the
appellants; D Guy (instructed by Colombotti & Partners) represented the
respondents.
Giving the
first judgment at the invitation of Stephenson LJ, ACKNER LJ said: Howard De
Walden Estates Ltd, the appellants, are the landlords of 1a Moxon Street,
London W1. They are appealing against an order made by His Honour Judge Honig
on October 15 1980 at the Bloomsbury County Court on the hearing of an
application for a new tenancy under Part II of the Landlord and Tenant Act
1954. It was an application by the respondents to this appeal, Vincenzo Turone
and Carlo Barbato, who were the tenants of the premises.
The premises,
1a Moxon Street, London W1, comprise a gentlemen’s hairdressers. Moxon Street
is a small side street running eastwards from Marylebone High Street and the
premises comprise a ground-floor shop with an area known as an ante-room off
it, and a basement. The tenants were occupying the premises under a lease for
10 years which was dated May 14 1970 and which reserved initially a rent of
£550, but at the end of which had risen to £1,000 per annum.
The
application for a new lease was not contested; the only issue which the learned
judge had to decide was on what terms the new lease should be granted.
Mr Patten, in
a careful and well-formulated argument, was at pains at the outset frankly to
accept that his appeal raises essentially one short point concerning the
judge’s findings as to the rent to be reserved in the new lease. Mr Patten
properly accepted that it was not open to him to challenge the judge’s findings
of fact; he would have to establish an error of law and he sought to do so, and
he so amended his notice of appeal, by alleging that there was no evidence
available to the learned judge upon which to base his decision that the right
rent for the new lease was £2,550.
Essentially
there were four issues concerning the fixing of the correct rent. So far as the
term is concerned, initially it had been common ground that the new lease
should be for a period of 10 years, but when the case was called on, and not
until the case was called on, the landlords indicated that their consent to 10
years no longer continued and that they were going to contend for a period of
seven years because as a matter of good estate management that was, according
to their point of view, the appropriate period, since the lease would then fall
in at the same time as that of adjoining property.
The four
issues concerning the quantum of rent were these: firstly, what was the
appropriate approach in fixing the market rent?
The rival views were these: on behalf of the tenant it was contended
that the global approach was the right approach, and by that you increased the
rent by a percentage figure appropriate to the extent to which rents had become
inflated since the rent was last fixed. The landlords, however, contended for
the zoning method; the zoning method involves dividing the premises into zones
A, B and C, the best area being zone A, and you consider what is the proper
figure for that, and then for the next portion of the property, zone B, you
halve that figure and for the remaining portion, zone C, you halve that.
The next issue
was: what were the comparable properties?
I need spend little time on this because the learned judge took the view
that the property to which he should apply his mind was 3b Marylebone Street.
The next issue
was whether the ante-room, to which I referred when describing the property,
should be considered as zone A and therefore be included with the shop, or
whether it should be looked upon as property of far less value and therefore be
considered as zone B, attracting a rent of half that of the shop.
Finally, the
fourth point at issue was whether there should be any discount for the
reduction, if the judge approved it, of the term from 10 years to seven years.
I can now deal
with those issues quite shortly. So far as the approach was concerned, the
learned judge considered that the zoning approach was the more appropriate one
and this is what he
should pay regard to, which was 3b Marylebone Street. It was the property which
had been chosen by the landlords’ surveyors; they had been involved in the
negotiation of a rent review in March of 1979. The property was the
subject-matter of a lease for a term of some 18 years granted in 1975 and
expiring in March of 1993. So on the first two issues the evidence of the landlords’
expert was preferred.
I now deal
with the third issue, the ante-room. The use being made of the ante-room by the
respondents, the tenants, was not for the purpose of the gentlemen’s
hairdressers, but as a place where tea could be made, towels could be dried and
occasionally the hairdresser himself could take a break there and have some
rest. The landlords’ expert contended that that was not the appropriate use
that should be made of the premises and, albeit that it would involve extra
expense, it could be thrown into the shop premises. The learned judge rejected
that view; he was of the opinion that the use which was being made of the
ante-room was a perfectly reasonable one and he therefore zoned the ante-room
as zone B, which therefore attracted half of whatever was the appropriate rent
for the shop.
So far as the
fourth issue, the discount, was concerned, this only fell to be considered, as
I have already indicated, when the case was being heard. Criticism was made by
Mr Patten about the tenants’ expert’s evidence, who said in terms, when he gave
that evidence, that he had not considered the matter before that day. I do not
think that is a fair criticism to make. If the landlords had given advance
notice that they were going to change their minds and ask for the lease to be
limited to a term of seven years rather than 10, there could have been some
substance in this criticism.
The tenants’
surveyor said that if a seven-year term is substituted for 10 years the rent
should be lower by 25% than the current valuation. This was disputed by the
landlords’ expert, who said that it should make no difference at all. It seems
to me that as a matter of common sense one would expect some discount. There is
clearly the advantage of having the certainty of a term of 10 years rather than
the lesser term with the possibility, albeit the probability, of a right to
renewal under the Act. That right, of course, is not absolute. The landlord
might wish, when the time came for the grant of a new lease, to contend that he
required possession for his own occupation, which is no doubt unlikely; or that
he wished to gain possession in order to replan, remodel and alter the whole
premises. He might have disposed of them in time for a successor to be entitled
to have been the landlord for the appropriate five years and himself to ask for
possession in order to occupy; so there is no certainty that, come seven years,
a new lease would be granted. So that as a matter of ordinary business approach
to the situation, one would expect that a lease of 10 years, specially one
which can be assigned, as this lease could be with the consent of the landlord,
would be more valuable and would attract a higher rent.
The learned
judge, when he came to deal with that particular matter, said that in the
interests of good estate management the landlords were contending that the
letting of the subject premises should be for seven years and not for 10 years;
he said that Mr Broomfield had said in evidence that a lease of seven years
would not really be less advantageous because of the applicants’ rights to
apply for a new lease, and he went on: ‘This seems to me a wholly fallacious
argument. To have to return to the court to obtain a renewal is not the same as
getting 10 years originally. However, I see a certain force in the landlords’
argument based on good estate management in this case, and I conclude that it
would be reasonable to grant a seven-year term but I must take account of the
fact that it puts the tenant in a worse position when I decide the rent payable
thereunder.’
I turn now to
the figures which the learned judge applied when fixing the rent. So far as 3b
Marylebone Street, the comparable premises, was concerned, the evidence which
had been given by the landlords’ surveyor was that if one applied the zoning
approach, the zone A figure was £10 per sq ft; accordingly the zone B figure
was £5 per sq ft and zone C £2.50 per sq ft. He went on to maintain, in his
report and in his evidence, that as the rent had been fixed in March of 1979, a
further increase had to be made to take into account the 18 months which had
expired, and that accordingly he would increase those figures to: £12 for zone
A, £6 for zone B and it would follow that zone C would be up to £3.
The learned
judge had a contest before him as to whether in fact these premises were
inferior or superior to those the subject-matter of the litigation, and he said
that he did not think there was much in it on the evidence. But he went on to
say: ‘However, I don’t know enough about the various terms of the lease (of the
comparable) to say how they compare with the grant of a seven-year lease with a
review after four years. What I have decided to do is to divide the premises
into three parts, zone A, zone B (the ante-room) and the basement’ (zone C). He
concluded his judgment by saying: ‘I conclude, therefore, that in the case of
1a Moxon Street the proper figure for the shop area should be £8 per sq ft, for
the ante-room £4 per sq ft and for the basement £2 per sq ft’, and thus the
total rental produced was the figure of £2,546, which he rounded up to £2,550
per annum, and he fixed the interim rent, to which there is no criticism if the
earlier figure which I have mentioned is right, at £2,400.
The learned
judge did not say in terms how he arrived at the £8 per sq ft. Mr Patten
accepts that if the learned judge had said: ‘I do not think, however helpful
the comparable is, that I should follow it slavishly because there has been a
contest, not only as to whether it is superior or inferior property, but also I
know little about the other terms of the lease than those to which reference
has been made, and accordingly I have decided to take £10 per sq ft for zone A,
the figure analysed by the landlords’ expert as being appropriate in 1979′, it
would have been extremely difficult to fault the learned judge. If he had then
said in terms that the tenants’ surveyor says that the discount should be 25%
for the reduction from 10 years down to seven years, and that he proposed to
take the appropriate figure of 20%, thus producing £8 per sq ft, the learned
judge could not have been faulted in that regard — certainly not in this court.
There would have been material upon which his decision could be justified,
although there could be counter-arguments as to whether it was the right
ultimate decision; but in this court it would have been unappealable. But, says
Mr Patten, that has not been spelled out in terms, and it would be wrong for
this court so to do.
I do not take
that view. This was an extempore judgment. The learned judge is not in those
circumstances to be expected to identify each and every process in his
reasoning. He has in this case made his approach clear, namely, the zoning
approach, and what is the comparable which he is prepared to have regard to; a
comparable does not mean a facsimile which he has to follow in each and every
respect. He has indicated why he has downgraded the ante-room contrary to the
landlords’ surveyor’s evidence, and he has said in terms that he thinks a discount
should be made and that he intended to make a discount in the figure at which
he has arrived.
It seems to me
to be highly probable that he did take £10 as being the zone A figure, and he
did discount it in the way in which I have suggested. Mr Patten did not suggest
any other approach which seems to have been likely to have been adopted by the
learned judge, except that he totally disregarded the comparable and plucked a
figure, so to speak, out of the air. I do not think that that fits in with the
learned judge’s very careful judgment; nor is it consistent with the sort of
reasoned approach that we have learned to expect from this judge, with his
considerable experience of this type of litigation.
I therefore
conclude that Mr Patten cannot achieve what he set out to do, namely, to
establish an error of law in that there was no evidence to justify the learned
judge’s decision.
I should
perhaps, for the sake of completeness, mention one final point which was made
by Mr Patten, although realistically, on the basis that it was not to be put in
the forefront of this appeal. The learned judge excluded from the new lease a
clause which was to prohibit absolutely assigning or subletting part of the
premises. He did so because both surveyors were of the same opinion, namely,
that as a matter of practice there could be no question, having regard to the
way in which the premises were laid out, of their being the subject-matter of
any such assigning or subletting; it just was not physically on. Accordingly,
the judge decided — and it seems to me, with respect, very sensibly — why
bother to include a clause in the lease which could have no relevance at all to
the premises? So he excluded it.
In the notice
of appeal it is contended that the learned judge failed to take into account
the position of any assignee from the applicants. That point, understandably,
was not pursued by Mr Patten, because it has no relevance to the point that the
premises were not physically likely ever to be the subject-matter of such a
subletting. Mr Patten said: ‘Ah, but there is always the question of sharing,
which is something short of actual subletting’. Significantly, not only was
this point not taken in the notice of appeal, but it was never raised in the
court below, and for my part I do not consider that the point is open to be
argued here. It appeared, at the end of the hearing of the matter before the
learned judge, to be common ground that there was no need to consider further
subclauses 22(b) and 22(c) and accordingly the learned judge, in my judgment
rightly, concluded that there was no need to burden a new lease with it.
For these
reasons I would dismiss this appeal.
SIR JOHN
WILLIS: I agree; there is nothing that I can usefully add.
STEPHENSON LJ:
I also agree.
The appeal
was dismissed with costs.
