German fashion designer Escada has won a dispute with wealthy landlord Earl Cadogan over rent increases at a central London store.
The High Court has rejected claims by the Cadogan Estate that it was entitled to take into account improvement works carried out by an Escada franchisee when reviewing rent for a retail outlet in London’s prestigious Sloane Street, SW1.
Judge Mackie held that the lease, when “read literally”, did not allow a valuer to include internal renovations undertaken as part of the tenant’s lease obligations.
Franchisee 4V, who took the lease of 194-195 Sloane Street in November 1996, at an initial rent of £385,000 pa, was required under the terms of the agreement to convert the units into a single, large store intended for use as the flagship Escada shop.
Along with a general £500,000 fit-out of the premises, it paid £75,000 to combine the two individual lets, to remove an office entrance to the first floor at no 194, and to install new staircases to both the basement and first floor.
After Escada took over the 14-year lease in 2001, it opposed Cadogan’s proposed rent reviews, due in December 2001 and 2006, on the ground that “in the absence of clear contrary words, the tenant should not have to pay rent for its own improvements”.
However, Cadogan sought a court declaration that the reviews should be calculated “by reference to the premises as improved by the tenant”, with the benefit of both the conversion and the new staircases.
Dismissing Cadogan’s claim this week, Judge Mackie said: “The clause does not require or permit the valuer to assume either that the premises have become one entity or that the pre-existing staircases have been removed.
“The wording may not be very sensible from a business point of view but that is a feature of innumerable agreements reached as a result of a compromise.”
Earl Cadogan, the UK’s third richest landlord, owns 90 acres of prime land in Knightsbridge and Chelsea through the Cadogan Estate.
References: EGi News 24/01/06
