Summary

The terms of a lease and the facts disclosed with clarity that, for rent review purposes, only the part of demised premises that consisted of a site excluding a building should be valued for determining the open market rental value of the demised premises.

Facts

The claimant landlord (C) claimed a declaration as to whether a rent review clause in a commercial lease required the open market rental value of the demised premises to be determined by reference to land and building or land alone. C's predecessor and the defendant tenant (B) had entered into an agreement to lease, the rent review clause of which stated that there would be an upward only rent review every 10 years and that the lease would be granted only on B's completion of the construction of a public house on certain of the land. The building was completed and the lease was granted. The lease defined the demised premises as "all that piece of land...and the whole of the premises". The rent review clause in the lease provided for a reserved rent or an open market rental value of the demised premises at the review date, whichever was higher. Open market rental value was defined as "the annual rental value at which the site comprised in the demised premises might reasonably be let for a term of 90 years".

Held

The lease had to be construed against the relevant factual background to the extent known to the parties when it was agreed. The starting point for assessing the rental value of the premises for rent review purposes was that the whole of the demised premises were to be valued. However, the lease in the instant case disclosed a contrary intention as the agreement to lease provided for B to build the public house at its own expense and the rent agreed was lower than the rack rent. The terms of the lease and the facts disclosed with clarity that, for rent review purposes, only the part of the demised premises that consisted of the site excluding the building should be valued to determine the open market rental value. The phrase "site comprised in the demised premises" was sufficient to exclude the building.

Declaration granted.