Argos is facing a rent increase at its North West distribution depot because the warehouse was built larger than the parties had contracted.
The retailer, which pays £1.7m pa for the unit at the Heywood Distribution Park in Greater Manchester, has lost a dispute with landlord WB Heywood over an arbitrator’s rent review.
The High Court rejected its application to appeal the arbitrator’s ruling that the new rent calculation, which is based on comparable properties, must take into account the fact that the warehouse was built almost 8,000 sq ft larger than contracted.
Judge Mackie heard evidence that when Argos took a 30-year lease of the unfinished unit in 2002, then landlord Ropemaker Properties had agreed that upon the five-yearly review the rent would be calculated by reference to a defined area of 381,106 sq ft.
However, once the warehouse was built, its actual size was 388,933 sq ft.
Argos challenged the arbitrator’s ruling that, although the area for valuation purposes was the smaller figure defined in the initial lease, the value of comparable properties should be adjusted to take into account the increase in size.
It claimed that the arbitrator had been “obviously wrong” in law to adjust the comparables, and in doing so had disregarded the parties’ contractual intentions.
However, the judge despite his agreement that the correct way to measure a building was a question of law, rather than a valuation judgment as argued by WB Heywood ruled that the method adopted by the arbitrator was not “obviously wrong” and could not be appealed.
References: EGi News 27/01/06
