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Construing a rent review clause in a 1960s lease 17 February 2014

One might have thought that there could be no more unanswered questions in relation to open market rent reviews, but the case of Bywater Properties Investments LLP v Oswestry Town Council [2014] EWHC 310 (Ch) shows that is not the case.

The case concerned leases of a kind that would never be granted today: 99 year building leases of commercial property in Oswestry town centre, with 25 year rent reviews to be triggered only by the landlord, and a provision stating that the rent could not fall below the original rent.  They were granted in the early 1960s.

The dispute arose after the landlord triggered the first review, after 25 years, but did not trigger the second one, after a further 25 years (for fear that the rent would drop).  The drafting of the lease did not expressly provide for what would occur if a subsequent review did not take place.  Did the rent stay at the amount determined at the 25th year, or did it revert to the original rent  payable at the start of the lease ?  The judge observed that the latter interpretation would save the tenant some £1 million over the next 25 years.

The judge construed the terms of the lease, and held that the rent should stay at the level determined at the 25th year.  This was on the basis that there was nothing in the rent review clause that would allow the rent to fall below the rent currently being payable, if the landlord decided not to invoke the review on any rent review date.

The facts of the case are unlikely to be replicated in the future, but the decision may be helpful in general terms for the judge’s observation that he did not derive any assistance from trying to ascertain the overall commercial purpose of the rent review clause.  Furthermore, it would be wrong to assume that the parties intended to create an upwards only rent review clause, particularly so in the case of a lease granted in the 1960s.

The transcript can be read here.

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