A Supreme Court decision yesterday overturned a High Court ruling that the rent payable by Bewleys on Grafton Street be allowed to fall to reflect market levels.
The matter of Ickendel Limited v Bewleys café Grafton Street Limited [2013] IEHC came before the High Court last year. The case concerned the appointment of an arbitrator who was appointed to review the rent and who in turn referred the matter to the High Court to seek direction from the court due to the ambiguity of the wording in the lease.
The lease in question was entered into on the 22nd September 1987 and was for a term of 35 years, with rent reviews every five years. The rent was reviewed in 1992, 1997, 2002 and finally in 2007. This was during the height of the boom. The dispute arose when the rent was due to be reviewed in 2012 and Bewleys sought a reduction as opposed to an increase to reflect the market changes.
There was ambiguity in the wording of the lease and the argument made by Bewleys Café was that the rent set in 1987 was to be a base line of which the rent could not go below. The High Court agreed with Bewleys and allowed the rent to be reduced as they said that due to the uncertainty of the wording of the lease, it could not be said that the rent was to be upwards only.
The High Court decision had allowed for the possibility of negotiation where rent was up for review.
However, the decision of the Supreme Court yesterday is disappointing for retailers and businesses with similar rent review clauses to Bewley’s Cafe . The decision of the Supreme Court centred around their interpretation of the relevant clause in the lease between Ickendel and Bewleys Cafe. They found that the lease provided for an upwards only rent review, even though it had not been expressed in those terms.
This Supreme Court decision highlights the importance of clarity and certainty when drafting the terms of your lease.
One point to bear in mind for the future is that leases entered into after the 28th February, 2010 will have the benefit of the protection offered by Section 132 of the Land and Conveyancing Law Reform Act 2009. This provides that any rent review clause in a lease or agreement for a lease entered into after this time (and relating to commercial property) will be construed as providing that the rent following the review can be fixed as being higher, lower or the same as that of the review date, regardless of any attempt to make the review clause an ‘upwards only’ review clause at the time of entering into the agreement.
However, we must note that the provision will not provide any assistance to existing tenants whose leases date prior to the 28th February 2010 as Section 132 does not apply retrospectively. This was illustrated by the decision of Mr Justice O’Neill on the 16th May 2013 were it was held that the upwards only rent review clause in the 20 year lease of the Medical Council’s headquarters at Kingram House, Dublin was not affected by a law banning upwards only rent reviews for commercial premises.
If you have commercial premises and would like to discuss your rent review clauses, please do not hesitate to contact us and we would be happy to assist.
Katie Nugent,
Brophy Solicitors
The lease in question was entered into on the 22nd September 1987 and was for a term of 35 years, with rent reviews every five years. The rent was reviewed in 1992, 1997, 2002 and finally in 2007. This was during the height of the boom. The dispute arose when the rent was due to be reviewed in 2012 and Bewleys sought a reduction as opposed to an increase to reflect the market changes.
There was ambiguity in the wording of the lease and the argument made by Bewleys Café was that the rent set in 1987 was to be a base line of which the rent could not go below. The High Court agreed with Bewleys and allowed the rent to be reduced as they said that due to the uncertainty of the wording of the lease, it could not be said that the rent was to be upwards only.
The High Court decision had allowed for the possibility of negotiation where rent was up for review.
However, the decision of the Supreme Court yesterday is disappointing for retailers and businesses with similar rent review clauses to Bewley’s Cafe . The decision of the Supreme Court centred around their interpretation of the relevant clause in the lease between Ickendel and Bewleys Cafe. They found that the lease provided for an upwards only rent review, even though it had not been expressed in those terms.
This Supreme Court decision highlights the importance of clarity and certainty when drafting the terms of your lease.
One point to bear in mind for the future is that leases entered into after the 28th February, 2010 will have the benefit of the protection offered by Section 132 of the Land and Conveyancing Law Reform Act 2009. This provides that any rent review clause in a lease or agreement for a lease entered into after this time (and relating to commercial property) will be construed as providing that the rent following the review can be fixed as being higher, lower or the same as that of the review date, regardless of any attempt to make the review clause an ‘upwards only’ review clause at the time of entering into the agreement.
However, we must note that the provision will not provide any assistance to existing tenants whose leases date prior to the 28th February 2010 as Section 132 does not apply retrospectively. This was illustrated by the decision of Mr Justice O’Neill on the 16th May 2013 were it was held that the upwards only rent review clause in the 20 year lease of the Medical Council’s headquarters at Kingram House, Dublin was not affected by a law banning upwards only rent reviews for commercial premises.
If you have commercial premises and would like to discuss your rent review clauses, please do not hesitate to contact us and we would be happy to assist.
Katie Nugent,
Brophy Solicitors
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