Yesterday saw the first test case in relation to Landlords increasing rent on foot of rent review clauses contained within commercial leases. This case was brought by the Tenant (Bewleys) of a high end coffee shop on Grafton Street in Dublin. Bewleys had a 35 year lease from the 22nd September 1987. Contained within this Lease was a five year rent review in favor of the Landlord. Under the Lease, rent was to be reviewed every five years, with the last review, in 2007, fixing a rent of € 1.5 million on the premises. The argument was that this rent was vastly in excess of the market value rent applicable on a property like this in 2013. Further they stated that the case was of ‘vital importance’ to their financial survival.
Mr. Justice Peter Charleton said ‘to proceed towards ever-increasing sums in rent every five years was to substitute an unreal figure for the rent’. The High Court judge has ruled that the rent payable by Bewley’s Café in Grafton Street, Dublin, to its landlord must be allowed to fall in line with the currently depressed open market rate. The court would not increase the rent applicable on the property under the rent review clause.
This decision will have significant repercussions for landlords who have been claiming upwards only reviews and will be widely welcomed by hard pressed shop tenants. However, it is very important to note that this case hinged on the fact that there was no specific upwards only rent review clause contained within the Lease Agreement. While there was a rent review clause, the interpretation of same was crucial to the decision. Judge Charleton said the rent review clause could only reasonably be construed so as to allow for a fall in rent, but never below the rent initially agreed in 1987.
We would advise any party who is under a commercial Lease to inspect same and investigate whether or not the conditions of the above case would apply to them.
If you think that any of the above matters affect you, please do not hesitate to contact Clarke Jeffers & Co Solicitors on 05991 31656 to discuss same.