Bywater Properties Investments LLP & Ors v Oswestry Town Council

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Abstract
Landlord and tenant – Rent. The proceedings concerned the proper construction of a rent review clause contained in two 99-year building leases of commercial property. The Chancery Division held that, on the proper construction of the clause, where a landlord had elected not to instigate a rent review, the rent remained at the previous increased level.

Summary
The judgment is available at: [2014] EWHC 310 (Ch)

The proceedings concerned a rent review clause contained in two 99-year building leases of commercial property (the property) in a town centre. The leases were entered into in the 1960’s between the defendant local authority (the authority), as landlord, and the claimant’s predecessor in title, as tenant. The claimant was the current tenant of the property. The leases provided for rent reviews every 25 years, which only the landlord had the right to instigate, and under which the reviewed rent might not fall below the initial reserved rent. Clause 5(1)(a) of the principal lease (the rent review clause), dated 15 May 1963, 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 … Provided Further that in no event shall the rent payable by the Tenants to the Landlords after each such date of review be less than the rent of £2,500 per annum hereby reserved’. Those terms were echoed in all material respects in cl 5(1) of a supplemental lease in 1964. In 1988, the landlord carried out a rent review, and the rent was increased. In 2013, the landlord elected not to instigate a rent review (the second occasion). The claimant issued proceedings to determine the true construction of the rent review clause.

The claimant contended that, on a true construction of the rent review clause, the effect of the landlord electing not to instigate a rent review on the second occasion was that the rent reverted back to the initial reserved rent. The defendant contended that the effect was that the rent remained at the 1988 increased level (the defendant’s construction). The defendant’s rationale for not instigating a rent review in 2013 was its concern that the reviewed rent would be less than the 1988 increased rent.

The court ruled:

It was settled law that, when interpreting a contract, the court was concerned to find the intention of the party or parties, and it did that by identifying the meaning of the relevant words in the light of: (i) the natural and ordinary meaning of those words; (ii) the overall purpose of the document; (iii) any other provisions of the document; (iv) the facts known or assumed by the parties at the time that the document was executed; and (v) common sense, but ignoring subjective evidence of any party’s intentions (see [10] of the judgment).

In the instant case, the defendant’s construction of cl 5(1)(a) of the lease was to be preferred, namely that, in circumstances where the landlord had elected not to instigate a rent review, the rent remained at the 1988 increased level (see [1], [28], [34] of the judgment).

Co-operative Wholesale Society Ltd v National Westminster Bank plc [1995] 1 EGLR 97 applied; Melanesian Mission Trust Board v Australian Mutual Provident Society 74 P & CR 297 applied; Basingstoke and Deane Borough Council v Host Group Ltd [1988] 1 All ER 824 considered; Charter Reinsurance Co Ltd v Fagan [1996] 3 All ER 46 considered; Martin v David Wilson Homes Ltd [2004] All ER (D) 332 (Jun) considered; Hemingway Realty Ltd v Clothworkers’ Co [2005] All ER (D) 121 (Mar) considered; Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc; The Reborn [2010] 1 All ER (Comm) 1 considered.