Rent reviews and unforeseen circumstances
| Pages | 390-393 |
| Date | 05 July 2013 |
| Published date | 05 July 2013 |
| DOI | https://doi.org/10.1108/JPIF-03-2013-0020 |
| Author | Malcolm Dowden |
| Subject Matter | Property management & built environment |
LAW BRIEFING
Rent reviews and unforeseen
circumstances
Malcolm Dowden
Gwentian Consulting Limited, Reading, UK and Charles Russell LLP,
London, UK
Abstract
Purpose – This paper aims to examine the English court’s approach to the interpretation of rent
review provisions in circumstances where the words used by the parties may produce a commercially
unforeseen or undesirable result. It emphasises that, while the court has wide discretion to adopt a
purposive approach, and to interpret an agreement in a way that produces a result in accordance with
“business common sense”, there must first be some ambiguity in the wording. The court cannot
rewrite a contract where the parties simply failed to foresee or to provide for unexpected market
conditions (here, a “double-dip” fall in rental values).
Design/methodology/approach – The paper examines the Court of Appeal ruling in Scottish
Widows v. BGC International [2012] EWCA Civ 607 as an example of the limits of the court’s ability
to arrive at commercially sensible results through purposive interpretation.
Findings – It concludes that where a clause has been drafted by experienced and skilled solicitors,
the court is unlikely to intervene unless it is clear that there is a mistake in the language or syntax. The
court will not rewrite an agreement where the parties did not anticipate adverse market factors.
Practical implications – The paper identifies the key factors taken into account when the court is
considering either interpretation or rectification of a clause that has produced a commercially
undesirable result. It also discusses the extent to which pre-contractual negotiations may be relevant to
interpretation or rectification of a contract.
Originality/value – The paper sets out the author’s reading as a commercial real estate practitioner
of key judicial dicta on the interpretation and effect of rent provisions.
Keywords Rent, Review, Contract, Interpretation,Rectification, Intention,Rent reviews, Rental value
Paper type Viewpoint
The court’s task when interpreting a commercial agreement is to discover its meaning
by considering the words used by the parties against the relevant background. Words
should be given their natural and ordinary meaning. However, if it is obvious that
something has gone wrong with the language, the court must apply common sense.
This can include correcting mistakes by interpretation, but:
.it must be clear that a mistake has been made, and what that mistake is;
.it must be clear what the parties intended to agree; and
.the mistake must be one of language or syntax.
The court cannot exceed the task of interpretation and re-write the contract where the
parties have failed to provide for a particular event or set of circumstances.
In Scottish Widows v. BGC International [2012] EWCA Civ 607 Scottish Widows
(SW) granted a sublease of premises to BCG. The rent payable by SW in 1996
(“Rent A”) was above the market rent.
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. 31 No. 4, 2013
pp. 390-393
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-03-2013-0020
JPIF
31,4
390
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