When parties are negotiating the terms of a renewal lease, it may be that they call upon the Court for assistance. Under sections 32 to 35 of the LTA 1954, the Court can decide those terms on which the parties cannot agree, including rent. The Court will be able to determine the rent which, having regard to the terms of the tenancy (other than those relating to term) the holding might reasonably be expected to be let for, in the open market by a willing lessor, subject to certain matters that are to be disregarded.
In this case, the facts are relatively unique. The London Borough of Newham (“Newham”) let a property to Flanders Road Community Association Limited (“Flanders”) to use as a community centre for a term of seven years, at a rent of £1. The property was in a poor state so Flanders provided to do works to the property failing which they would pay £1,200 to Newham. Other terms were relatively onerous and related to the use of the property.
When negotiations commenced for the renewal lease, the parties could not agree the rental figure. Under an amended claim form, Flanders stated that the principal rent was £1. Newham wanted a commercial rent of £23,000. Expert evidence by both parties provided that the rent was £1 and £16,000 respectively.
In July 2015, the County Court ordered that the new rent should be £1. The expert evidence provided by both parties was deemed to be inadequate and as such could not make a ruling on rent. Consequently, the rent would be as it was under the old lease at £1.
The decision was appealed but dismissed.
The High Court made it very clear that it would only allow the appeal of a lower Court if the decision was wrong either because it was unjust or because it contained an error of law. The High Court considered the principles on which the original Court had acted and the reasons it had given which lead to its decision. The High Court said the lower Court had been right in its conclusion that there was no reliable evidence of the letting value of the property and thus it should remain as passing.
This case acts as a reminder to landlords and tenants that is imperative they obtain suitable expert evidence. The parties need to help the Court and if comparables don’t exist, the parties need to try and guide the Court. The decision will not be open to appeal unless there has been a serious procedural mishap.
