Category Archives: Rent Reviews

Rent review clause interpreted according to commercial purpose avoiding colossal rent decrease

In a recent case a Landlord could have paid a high price for not instigating a rent review in 2013.

As with many Landlords it was worried that the reviewed rent would be less than the most recent rent review’s increased rent even though that rent review was in 1988.

Bywater Properties Investments LLP & Ors v Oswestry Town Council [2014] was concerned to interpret rent review clauses in 2 99 year building leases of a former Woolworths.

They provided for rent reviews every 25 years, which only the landlord could initiate and where the reviewed rent could not fall below the initial reserved rent (“the threshold limit”) which was £2,500 per annum on the main lease and £1,500 per annum in the other lease.

At the first review, in 1988, the landlord gave notice, and the rent was increased. In 2013, the landlord elected to forego a rent review.

The tenants read the rent review clause wording:

” the Landlords shall have the right to review the yearly rent for the time being payable hereunder……and if the Landlords shall give to the Tenants such notice as aforesaid then from and after each such date of review the yearly rent … shall be … the fair ground rental market value of the demised premises …”

to mean the Landlord’s entitlement to a market rent after each review date was predicated on the Landlord having given that notice calling for a review. In default of that happening the rents, under each lease, reverted to the threshold rents of £2,500 and £1,500 per annum respectively, at the 2013 review date.

If the tenant was right they saved £1M over the next 25 years.

The Landlord and the High Court read the rent review clause wording to mean that the rent stayed at the 1988 increased level.

The High Court said “the rent for the time being payable hereunder” clearly referred to the initial rent and also to any subsequent increased rent.

“It also, therefore, indicates very clearly in my judgment that if the landlord does not avail himself of that right then the “rent for the time being payable hereunder” shall continue to be paid, and if that is a subsequent increased rent then it is that will continue to be paid, rather than defaulting to the initial reserved rent.”

If we were inclined to be critical we might say “the rent for the time being payable hereunder” referred to what was liable to be reviewed rather than specifying the rent that followed a review date in default of a rent review.

The second reason in support of that interpretation was a variant of that first. The third reason in support was far from clear or convincing.

This case illustrates that in cases of ambiguity review clauses will be construed consistently with their commercial purpose to maintain rental levels in line with property inflation.

This blog is posted out of general interest. It does not remove the need to get proper legal advice in individual cases.