Iain Doran
Glasgow, 10 March 2011
Presentation Agenda
•
•
•
•
•
•
Value
Origin and Philosophy of Rent Reviews
Onerous Clauses
Headline Rents
Assumptions and Disregards
Notice Provisions
Value
• My House
• My Car
• Assumptions and Disregards
• Best Price/Rent
• How “economic [wo]man” behaves
Origin and Philosophy of Rent Reviews
•
•
•
•
s 34 Landlord and Tenant Act 1954
1960s/70s – emergence of 25 x 5 FRI lease
Aim to make property investment = investment in equities
Various possibilities, but open market rent approach prevailed
(but note increased use of RPI under Lease Code and gearing
in ground leases)
• Idea is that the actual tenant has moved out, taking his fixtures
and fittings, and that the premises are bring offered for let on
the open market with VP but on the same terms as the actual
lease (except rent)
Origin and Philosophy of Rent Reviews
• Assumptions and Disregards – especially disregard of Tenant’s
improvements
• But basic starting point is you value what’s there on the review
date – HRR 4.5.4, Ponsford v HMS Aerosols [1976]
Onerous Clauses
• Plinth Property Investments v Mott, Hay & Anderson [1978]
– Restrictive alienation/user clause
• Norwich Union v British Railways Board [1987]
– Rebuilding obligation in long lease of dilapidated building
• Keep open clauses?
Headline Rents
"any rent free period or period of discounted rent has expired and
any other consideration which the Landlords might then be expected
to grant to a tenant on taking a lease of the Leased Premises has
been paid or otherwise discharged"
Headline Rents
• Rent free periods – 2/3 months v 2/3 years
• 99 Bishopsgate – huge City of London building; 16 months rent
free would be needed on open market letting, but not available
at review, so discount on OMR
• Panic in the streets!
• Fitted-out assumptions, then assumptions that T has had
benefit of “any rent free period or other inducement which
would be offered in the open market”
• But rent free for fitting out periods only? Reverse premiums?
• Comparables at (say) £100 psf Zone A when T has received 2
years rent free and £1m RP?
Headline Rents
• Co-operative Wholesale Society v Nat West [1994]
• Church Commissioners for England v Etam [1995/97]
• Courts' approach to HRs:
- no special rules: find intention of parties, having regard to
language used and context of surrounding circumstances
- have regard to commercial purpose - "yield to business
common sense"
- But can't rewrite the language, use “presumption of reality”
- so courts more likely to hold that clauses just counter the 99
Bishopsgate effect rather than confer a HR
- but while courts lean against HRs, can't reject all HR clauses
as "simply preposterous", so sometimes you will find one eg
Broadgate Square v Lehman Bros [1994]
Assumptions and Disregards
• Cadogan v Escada [2006]
• 194/195 Sloane Street, Chelsea – originally two separate shops,
each with its own stair to basement and first floors; Escada to
transform into one shop with a single prominent customer stair
• Rent review clause in pretty standard form – T’s works
disregarded on review – but with specific assumption of new
customer stair
• How many stairs for rent review purposes?
Assumptions and Disregards
• Cadogan v Escada – three stairs!
• Inevitable consequence of disregard of T’s works coupled with
specific assumption of new stair
• So L loses lots of valuable NIA, even tho’ T actually using it!
• Clear words override commercial stupidity
• “Four eyes” review
Notice Provisions
• Warborough Investments Ltd v Central Midlands Estates Ltd
(2007)
– Premises sub-let
– Notice required to initiate review in head lease, but it could
be served on tenant’s last known address OR the premises
– No response within one month – landlord’s notice figure
binding
– Notice deliberately served on premises and not seen by
head tenant for over a month
Notice Provisions
– Tough – landlord’s figure stands!
Contact Us
• Iain Doran
• iain.doran@dundas-wilson.com
• 0141 304 6105
Questions and Discussion