2. Iain Doran Glasgow, 10 March 2011

3. Presentation Agenda Value Origin and Philosophy of Rent Reviews Onerous Clauses Headline Rents Assumptions and Disregards Notice Provisions

4. Value My House My Car Assumptions and Disregards Best Price/Rent How “economic [wo]man” behaves

5. Origin and Philosophy of Rent Reviews s 34 Landlord and Tenant Act 1954 1960s/70s – emergence of 25 x 5 FRI lease Aim to make property investment = investment in equities Various possibilities, but open market rent approach prevailed (but note increased use of RPI under Lease Code and gearing in ground leases) Idea is that the actual tenant has moved out, taking his fixtures and fittings, and that the premises are bring offered for let on the open market with VP but on the same terms as the actual lease (except rent)

6. Origin and Philosophy of Rent Reviews Assumptions and Disregards – especially disregard of Tenant’s improvements But basic starting point is you value what’s there on the review date – HRR 4.5.4, Ponsford v HMS Aerosols [1976]

7. Onerous Clauses Plinth Property Investments v Mott, Hay & Anderson [1978] –Restrictive alienation/user clause Norwich Union v British Railways Board [1987] –Rebuilding obligation in long lease of dilapidated building Keep open clauses?

8. Headline Rents "any rent free period or period of discounted rent has expired and any other consideration which the Landlords might then be expected to grant to a tenant on taking a lease of the Leased Premises has been paid or otherwise discharged"

9. Headline Rents Rent free periods – 2/3 months v 2/3 years 99 Bishopsgate – huge City of London building; 16 months rent free would be needed on open market letting, but not available at review, so discount on OMR Panic in the streets! Fitted-out assumptions, then assumptions that T has had benefit of “any rent free period or other inducement which would be offered in the open market” But rent free for fitting out periods only? Reverse premiums? Comparables at (say) £100 psf Zone A when T has received 2 years rent free and £1m RP?

10. Headline Rents Co-operative Wholesale Society v Nat West [1994] Church Commissioners for England v Etam [1995/97] Courts' approach to HRs: - no special rules: find intention of parties, having regard to language used and context of surrounding circumstances - have regard to commercial purpose - "yield to business common sense" - But can't rewrite the language, use “presumption of reality” - so courts more likely to hold that clauses just counter the 99 Bishopsgate effect rather than confer a HR - but while courts lean against HRs, can't reject all HR clauses as "simply preposterous", so sometimes you will find one eg Broadgate Square v Lehman Bros [1994]

11. Assumptions and Disregards Cadogan v Escada [2006] 194/195 Sloane Street, Chelsea – originally two separate shops, each with its own stair to basement and first floors; Escada to transform into one shop with a single prominent customer stair Rent review clause in pretty standard form – T’s works disregarded on review – but with specific assumption of new customer stair How many stairs for rent review purposes?

12. Assumptions and Disregards Cadogan v Escada – three stairs! Inevitable consequence of disregard of T’s works coupled with specific assumption of new stair So L loses lots of valuable NIA, even tho’ T actually using it! Clear words override commercial stupidity “Four eyes” review

13. Notice Provisions Warborough Investments Ltd v Central Midlands Estates Ltd (2007) –Premises sub-let –Notice required to initiate review in head lease, but it could be served on tenant’s last known address OR the premises –No response within one month – landlord’s notice figure binding –Notice deliberately served on premises and not seen by head tenant for over a month

14. Notice Provisions –Tough – landlord’s figure stands!

15. Contact Us Iain Doran iain.doran@dundas-wilson.com 0141 304 6105

16. Questions and Discussion