Re: Ickendel Ltd. v. Bewley’s Café Grafton St. Ltd.
Bewley’s hold this premises on Lease for a term of 35 years from 6 August 1987 and the Lease incorporates rent reviews on 1 January 1992 and at five yearly intervals thereafter.
The Initial Rent (or the First Reserved Rent) in the Lease was €213,316 from the date of commencement.
There were rent reviews in the premises every 5 years from 1992 until 2007. There was no issue at these times in relation to the interpretation of the rent review clause as the market rent at each of these review dates was higher than the rent then payable.
In 2012 the landlord sought a revised rent arguing that the rent on review should be the greater of the open market rental value or the passing rent of €1,463,964.
The tenant argued that the rent should be the higher of the open market rent or the Initial Rent (the 1987 rent) reserved by the lease being €213,316.
As the matter could not be resolved the case was referred to the High Court before Mr. Justice Charleton by way of a construction summons.
The Judge made reference to the rent review clause in the Lease in which it is stated that the revised rent on review shall be ‘…equal to the greater of (A.) the rent payable hereunder during the preceding period or (B.) such revised rent as may time to time be ascertained in accordance with the provisions in that behalf contained in clause 6 hereof (whichever shall be the greater)..’
The case effectively centred around the meaning of the words ‘preceding period’.
The Judge felt that there was ambiguity within the rent review clause and stated, inter alia, and by reference to other clauses in the Lease that if the ‘preceding period’ was to be held to be the period immediately prior to the rent review date that the word ‘preceding’ should have been qualified in some way to ensure that there was no misunderstanding.
Taking everything into consideration the Judge held that the correct interpretation of the rent review clause was that the rent on review was to be the open market rent but that such rent could not be lower than the initial rent of €213,316 and dismissed the contention that the rent on review could not fall below the passing rent of €1,463,964.
The Judgement in this construction summons case is based on the particular wording of the lease of the Bewley’s Grafton Street building and consequently highlights the potential dramatic impact on rental and property values that may turn on a word or lack of a word within a rent review clause.
I recommend that you have your rent review clause/lease examined by a rent review expert to establish what impact this judgement may have on your property.
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