New case on mistake, interpretation and rent review
Judgment was delivered today in the case of Elmfield Road Ltd v Trillium (Prime) Property GP Ltd [2016] EWHC 3122 (Ch). The case concerned the interpretation of rent review provisions in a reversionary lease of office premises. The lease contained provision for increase of rent with effect from the fifth and tenth anniversaries of the commencement of the term by indexation of the passing rent. The reviewed rent was to be calculated by multiplying the passing rent by the RPI index figure for the month prior to the review date and then dividing it by 193.1. That figure was the RPI index figure for the month falling four and a half years before the commencement of the term. In that month, the rent under an existing lease had been reduced by nearly £200,000 p.a. as part of the transaction by which the reversionary lease was also granted. The Court rejected the tenant’s case that, by an obvious mistake, the rent review clause indexed the passing rent under the reversionary lease rather than the amount of the reduced rent payable under the existing lease. Although the rent review provisions were unusual and provided for a greater increase in rent than standard indexation would have produced, it was not possible to say this was irrational or an obvious mistake given the other terms of the transaction as a whole. The judgment also considers the principles on which non-binding heads of terms may be admissible as an aid to interpretation of a lease. Timothy Fancourt QC represented the successful landlord.
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