Rent review

Citation

(1998), "Rent review", Property Management, Vol. 16 No. 1. https://doi.org/10.1108/pm.1998.11316aab.021

Rent review

Rent review

Dukeminster (Ebbgate House Onle) Ltd v. Somerfield Properties Co Ltd [1997] 40 EG 157

The question which arose in this case turned on the phrase "the notional premises" contained within the rent review clause: "the notional premises" by reference to which the review rent was to be calculated were defined (inter alia) as being "a warehouse unit within a thirty-five mile radius of Ross-on-Wye and having... a total gross internal area of 50,000 sq ft...". It was the landlord's contention that it was entitled to elect for a particular location within the area prescribed as being the location of "the notional premises", a contention which was accepted by the judge at first instance. The Court of Appeal disagreed. The effect of such an interpretation of the words used in the rent review clause would mean that, faced with a wide variation in the rents passing for such premises within the prescribed area, from relatively low rentals in, say, the Welsh Valleys through (to quote from the law report) other cities and towns including "Chepstow, Newport, Monmouth, Abergavenny, Brecon, Hereford, Leominster, Ludlow, Droitwich, Worcester, Great Malvern, Evesham, Tewkesbury, Ledbury, Cheltenham, Gloucester, Cirencester and Stroud." to high rental areas such as North Bristol, the landlord would elect nationally to site the notional premises in North Bristol.

As Nourse L J observed," ...it could not reasonably have been intended that a valuation of any 50,000 sq ft warehouse in the area should be the basis for valuing the premises at Ross-on-Wye. A provision which operated thus might well produce a valuation substantially higher or lower than any that could reasonably have been intended to apply to the premises in Ross-on-Wye. So some other intention must be imputed to the parties, and, in my view, there is only one which passes the test of reasonableness. The differences in value being attributable to differences in location, it could only reasonably have been intended that the notional warehouse should be situated in a location comparable to the site of the premises in Ross-on-Wye. Accordingly", he went on "...I would construe the definition of 'the Notional Premises' to mean a warehouse unit [situated either where the Premises as defined are situated or in a location comparable thereto] within a thirty-five mile radius of Ross-on-Wye..."

For a recent case where the court had to decide as a matter of construction whether the lease contained an "upwards-downwards" rent review clause, or an "upwards - only ratchet" clause, see Standard Life Assurance v. Unipath Ltd [ 1997] 38 EG 152.