Rent review 2014
| DOI | https://doi.org/10.1108/JPIF-05-2014-0034 |
| Published date | 29 July 2014 |
| Date | 29 July 2014 |
| Pages | 530-533 |
| Author | Malcolm Dowden |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
LAW BRIEFING
Rent review 2014
Malcolm Dowden
Gwentian Consulting Limited, Reading, UK
Abstract
Purpose – The purpose of this legal update is to examine the recent case law relating to rent review in
England and Wales. The paper argues that as rent terms have reduced in length, and as market
conditions have tended to produce nil-uplifts, there have been relatively few review cases before the
court. Cases that reach court tend to fall into two broad categories: contractual interpretation and
challenges to third-party determination.
Design/methodology/approach – Review and analysis of case law in England and Wales.
Findings – There are no special rules for interpreting rent review clauses. The court’s approach to
contractual interpretation follows House of Lords and Supreme Court rulings culminating in RainySky
SA v Kookmin Bank (2011). There are also very limited circumstances in which the court will set aside
an arbitrator’s award, informed by a policy that favours upholding arbitration awards as a quick and
cost-effective way to settle rent review disputes.
Practical implications – Rent review clauses must be interpreted in accordance with the normal
rules of contractual interpretation. The court is unlikely to be swayed by submissions asserting the
“general purpose” of rent review.
Originality/value – This is an original analysis of case law.
Keywords Arbitration, Commercial property, Contractual interpretation, Rent review,
Serious irregularity, England and Wales
Paper type Research paper
Rent review cases have fallen away sharply in recent years, reflecting both market
conditions and a continuing reductio n in average lease terms. As sho rter lease terms
become more common, the need for rent review dimin ishes. However, that does not
mean that rent review has ceased to be an essential feature of the commercial proper ty
market. Longer lease terms require a mechanism to accommodate the changing value
of money over time. Statutory renewal of leases protected by the Landlord and Tenant
Act 1954 is also likely to replicate the review provisions contained in the original lease.
Further, parties may continue to prefer a rent review provision that adjusts the rent to
reflect open market changes, rather than adopting a mec hanistic clause that increases
rent in line with a measure such as the retail prices index (RPI) or the consumer prices
index (CPI). Indexation inexorably increases the rent. Open market review may not.
With fewer rent review cases reaching court, two main strands have become
apparent. The first relates to points of contractual interpretation, with one or both
parties seeking a declaration as to the meaning or effect of a rent review clause.
The second strand involves a challenge by one party to the decision of a third party,
whether expert or arbitrator, appointed to determine the revised rent.
Contractual interpretation
In Bywater v Oswestry Town Council (2014) the court had to rule on the construction of
a rent review clause in a lease granted during the 1960s. Rent reviews were to take
place every 25 years. The rent was reviewed, and increased, in 1988. In 2013 it was
apparent to the landlord that there would be no rent increase, and that the rent was in
fact likely to be lower than the 1988 level.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
Journal of Property Investment &
Finance
Vol. 32 No. 5, 2014
pp. 530-533
rEmeraldGroup PublishingLimited
1463-578X
DOI 10.1108/JPIF-05-2014-0034
530
JPIF
32,5
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