Summary

Where a rent review clause provided that only the landlord could instigate a review and that the reviewed rent could not be less than the initial reserved rent, and where the landlord had instigated a review and increased the rent after the first review period but had not instigated a review after the second period, the clause meant that the rent payable after the first review continued to be payable. The rent did not revert back to the initial reserved rent.

Facts

The claimant tenants (T) made a Part 8 claim to determine the construction of rent review clauses contained in commercial leases.

The leases had been entered into in 1963 by the defendant landlord local authority and T's predecessor in title. They provided that "On the expiry of each period of 25 years ... the Landlords shall have the right to review the yearly rent for the time being payable hereunder" on giving the tenant notice. Accordingly, only the local authority had the right to instigate a rent review. The leases provided that the reviewed rent could not be less than the initial reserved rent. The local authority instigated a rent review after the first 25 years, and the rent was increased. After the second 25 years, the local authority, believing that a reviewed rent would be lower than the existing rent, chose not to instigate a rent review. T claimed that in that situation, the construction of the rent review clause was that the rent reverted back to the initial reserved rent, not the rent payable after the first review.

Held

(1) The local authority was entitled to place considerable reliance on the words "the Landlords shall have the right to review the yearly rent for the time being payable hereunder". The reference to "the rent for the time being payable hereunder" was clearly to be read as a reference to the initial rent and also to any subsequent increased rent. It also indicated very clearly that if the landlord did not avail itself of that right then the "rent for the time being payable hereunder" would continue to be paid, rather than defaulting to the initial reserved rent. The phrase "from and after each such date of review" only applied if the landlord invoked the rent review procedure. T's point that that phrase did not expressly address the position where the landlord had invoked one review procedure but not the second therefore lost much of its force if it was accepted that the consequence was that the "rent for the time being payable hereunder" continued to be payable. There was no lacuna in the express terms of the clause which needed to be filled by construction or implication (see paras 23-25 of judgment). (2) The court did not derive real assistance either way from arguments directed to the commercial purpose of the rent review clauses. The case was one where the court had to look at the provisions of the leases themselves to discern the commercial purpose behind what had been agreed, Melanesian Mission Trust Board v Australian Mutual Provident Society (1997) 74 P. & C.R. 297 considered. T's submission, that the local authority's construction offended against common sense because it turned a threshold limit rent review clause into an upwards-only clause, ignored the point that the original tenant had been prepared to agree to a landlord-only rent review clause so must have known and accepted the risk that the landlord might not invoke the rent review clause, leaving the tenant unable to benefit from any reduction in rental values. T's analysis, which involved reverting back to the initial rent in such a case, was no more commercially obvious, nor did it make any more common sense. It was more inherently unlikely that a landlord who had successfully negotiated a landlord-only rent review would have agreed to a provision reverting the rent back to the initial rent. The court did not, however, accept the local authority's submission that construction should be approached on the basis that both landlords and tenants would have entered into the leases assuming that any rent review would only ever produce an upwards-only review. It was difficult for a court to make any safe assumption about what parties to a lease entered into in the 1960s might have assumed. The court did not accept the local authority's submission that the landlord would never have agreed to a clause bearing T's construction because it would have perceived it as creating a trap, where if through oversight it failed to serve notice in time the rent would default back to the initial rent. That was a risk always inherent in any rent review clause which was not automatic and triggered only by notice, particularly where the landlord reserved the sole right to invoke a review (paras 31-33).

Judgment for defendant