There has been considerable media comment on the Bewley’s lease case with some suggestions that the case has wider ramifications for the industry. This is not so in our view.
Leases are, in essence, agreements between landlords and tenants. The courts have the job of deciding what the language the parties use in leases actually means. In the Bewley’s case (Ickendel Limited -v- Bewley’s Café Grafton Street Limited), the High Court considered a rent review clause. Charleton J. decided that, on the basis of the specific wording used in the lease, the rent after review in 2012 would reduce in the light of market conditions. He did not decide this because of any policy conclusion on his part – he simply applied the rules of construction which courts generally use when interpreting commercial agreements.
The judge made clear that his decision was based on the particular facts before him. He confirmed that if the rent review language was clear in preventing a reduction in rent regardless of market conditions, then he would have enforced it:
“An agreement must be left alone once it is clear what the parties have agreed.”
The judge examined the wording used in the lease and decided that the parties had clearly put a floor of the original rent (set in 1987) as the minimum rent payable regardless of market value on any review. However, Charleton J. decided that the parties had not used clear language to set out what would happen with regard to whether the rent could never reduce below the previously reviewed level. He commented that the emphasis in the rent review clause was on market rent and that the parties had not used language, as used in many leases, which would have made it clear that the rent could never drop:
“I am not entitled to take into account that in the intervening five years since the last rent review, 2007 to 2012, rentals for retail and restaurant premises even in the best areas have dropped markedly. Nor am I entitled to substitute my own view of what would be a fair arrangement between the parties.”
The judge concluded that, on the particular facts of the case, the parties had agreed to market value rent reviews with a floor of the 1987 rent amount.
The case emphasises the importance of articulating what the parties have agreed in clear language, rather than indicating any move by judges to rewrite that agreement in the light of unexpected economic circumstances.