Harmohinder Singh Gill (as Trustee of the Gilcrest UK Pension Scheme) v Lees News Limited
[2023] EWHC 403 (Ch)
Kwik-Fit Properties Ltd v Resham Ltd
9 August 2024
[2024] EWCC 4
County Court
A shop wanted a new lease with the right to leave early and a lower rent. The judge said no to leaving early because there wasn't a good reason. The judge decided on a fair rent by looking at what similar shops were paying.
Key Facts
- •Kwik-Fit Properties Limited (tenant/claimant) sought a new business lease renewal against Resham Limited (landlord) under Part II of the Landlord and Tenant Act 1954 (LTA 1954).
- •The dispute concerned three lease terms: a tenant's break clause, contribution to access road maintenance, and rent.
- •The premises are a modern car repair and fitting centre on an industrial estate in Washington, Tyne & Wear.
- •The existing lease (1996 Lease) was a 25-year term with no break clause and a fixed rent of £35,000 per annum.
- •The landlord, Resham Limited, is a property investment company owned by members of the Mander family.
- •Both parties presented expert evidence from chartered surveyors on rent and lease terms.
Legal Principles
The court has wide discretion under s35 LTA 1954 to determine lease terms (other than rent and duration), having regard to the current tenancy and all relevant circumstances.
Landlord and Tenant Act 1954, s35
The court must fix rent under s34 LTA 1954 at what the holding might reasonably be expected to fetch in the open market, disregarding tenant occupation history, goodwill, and certain improvements.
Landlord and Tenant Act 1954, s34
In determining lease terms under s35, the court considers the existing terms, the burden of proof lies with the party seeking a change, and the change must be fair and reasonable.
O’May v City of London Real Property Ltd [1983] 2 AC 726
When considering break clauses, the court balances the landlord's right to redevelopment against the tenant's need for security of tenure. A 'real possibility', not probability, of the triggering event is sufficient.
Adams v Green [1978] 2 EGLR 46, Davy’s of London (Wine Merchants) Ltd v City of London Corporation [2004] 3 EGLR 46, First Secretary of State v Greatestates Ltd (unrep. 2005), Dukeminster Ltd v West End Investments (Cowell Group) Ltd [2019] L.&T.R. 4 CC
Market rent determination relies on comparables, with open market lettings prioritized. Adjustments are made for differences between comparables and the subject property, but the court must disregard certain factors (s34 LTA 1954).
GREA Real Property Investments Ltd v Williams (1979), Reynolds & Clark on Renewal of Business Leases (6th Edn)
Outcomes
No tenant's break clause will be included in the new lease.
Kwik-Fit failed to demonstrate a real possibility of the premises becoming unsuitable for its business within the 15-year lease term. The general concerns raised did not apply specifically to these premises. Market practice shows flexibility is not always paramount.
The tenant's covenant to contribute to access road maintenance will remain unchanged.
The landlord's liability for these costs is not capped at one-third; the 'reasonable endeavours' clause could result in higher costs. Shifting the risk to the landlord is not justified.
The market rent for the new lease (and interim rent) is set at £39,300 per annum.
The court considered various comparables, adjusting for differences in location, condition, and lease terms. The judge gave more weight to recent lettings of similar fast-fit premises and discounted certain evidence from the experts.
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