Interaction of rent review clause and tenant's break

Citation

Dowden, M. (2001), "Interaction of rent review clause and tenant's break", Journal of Property Investment & Finance, Vol. 19 No. 6. https://doi.org/10.1108/jpif.2001.11219fab.005

Interaction of rent review clause and tenant's break

Interaction of rent review clause and tenant's break

Johnsons of London Ltd v. Protec Trust Management [2000] EGCS 114 concerned a lease granted in March 1994 which provided that: "The Lessee shall be entitled to serve written notice on the Lessor breaking the term of this lease six months after the Lessor's receipt of the said notice at any time before a date being 56 days after the final determination of the rent review due to occur at the end of year five of the term…".

The rent review clause gave only the landlord the power to operate the review. The landlord chose not to trigger the review. Nevertheless, the tenant wished to terminate its lease and served a break notice on 27 April 1999. The landlord refused to accept that the notice was effective, and the tenant therefore sought a declaration that its lease had been ended, or, alternatively, rectification of the lease so that its notice would then become valid.

The landlord argued that the break clause was necessarily linked to the operation of the rent review and was designed to give the tenant a "get out" tied to the first review. If the landlord chose not to initiate the review, no "final determination of the review" would take place, and the tenant would have no right to break.

The tenant attempted to argue that the right to break arose on the date upon which the rent review was "due to occur". If a rent review occurred, the right to break would be lost if notice was not served within 56 days of the final determination of the rent; if a rent review did not occur, then the right to break continued until the end of the lease.

The judge concluded that the most natural meaning of the words used was that the tenant was to have a right to break only during a period commencing with the final determination of any review and ending 56 days later. Even though this meant that, in the event of no review, the tenant would have no right to break, this was not so commercially absurd a result as to warrant the conclusion that it could not have been intended.

The tenant was therefore driven to argue that the lease should be rectified. However, the final wording of the provision had been drafted by the tenant's solicitor and so rectification would be ordered only if the judge was satisfied that the landlord had realised that the tenant's solicitor had made a mistake and was taking advantage of it. The judge did not believe this to be the case. The landlord's evidence showed that he thought the tenant's only objective in wanting a break provision was to provide it with a lever for use in the rent review negotiations. There was nothing in the circumstances to displace the landlord's belief that the tenant did not regard the break provision as a mechanism for ending the lease. The judge accepted that there was no element of sharp practice on the part of the landlord and so rectification was not available to the tenant.