Smithfield lease renewal – traders depressed by Sales
Mr Justice Sales has given judgment in the trial of two preliminary issues in the case of Edwards & Walkden (Norfolk) Limited and ors v The Mayor and Commonalty and Citizens of London [2012] EWHC 2527 (Ch), in which Martin Rodger QC and Joe Ollech represented the successful Defendant landlord.
The case involved 51 claims for new tenancies under the Landlord and Tenant Act 1954 brought by the wholesale meat traders who are tenants of Smithfield Market. The court ruled on 2 issues considered to be critical to the form of the new tenancies and the rent to be paid, namely (a) whether, as a result of specific legislation governing Smithfield Market, the tenants were entitled to have their rents reduced on account of income received by the landlord from parts of Smithfield Market let for non-market purposes, and (b) whether the rent to be fixed in due course should be an all-inclusive figure for both rent and service charge (the tenants’ preference), or whether it should consist of a rent and a separate variable service charge (the landlord’s preference).
The first issue was pertinent to Smithfield Market in particular and was primarily a matter of statutory interpretation. The second issue, of wider interest, required the Court to apply the principles of O’May v City of London Real Property Co Ltd [1983] 2 AC 726. The landlord’s success in this regard is notable because, for the most part, the current leases were let on an all-inclusive rent and the Court held that a change to a separate variable service charge was justified. The City discharged the burden of establishing that a change from the existing terms was justified and the Court accepted that a separate variable service charge was the better method for ensuring fairness between landlord and tenant. Drawing on the decision in Hyams v Titan Properties Ltd (1972) 24 P & CR 359 the Court considered that the all-inclusive model favoured by the tenants exposed both parties to unknown future risk.
A large number of the existing leases included a clause by which the parties had settled a similar dispute on a previous lease renewal on the basis that, next time round, they would enter into negotiations to determine whether the rent should be all-inclusive or not, and that in the absence of agreement the parties would apply to the Court for a determination of that question. The Court agreed with the landlord that the effect of this agreement was to reduce the weight to be attached to the existing terms of the leases.
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