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Interpretation Of A Rent Review Clause

A rent review clause allows changes to the rent payable under a lease, for example a common review is to reflect the market value of the premises. The clause sets out the review dates when the first review will take place and then provide further reviews usually on every fifth anniversary.
The case of TRILLIUM (PRIME) PROPERTY GP LTD v ELMFIELD ROAD LTD involved a lease of premises for a term of 25 years with a rent review occurring every 5 years, the rent at the time was £965,000. At the end of that lease the parties entered into a reversionary lease which stated the rent was to be reviewed by multiplying the Initial Rent by the RPI index figure for the month preceding the relevant review date and dividing the result by the base figure.
In the reversionary lease, the Rent was £1.2 million, and this resulted in a revised rent payable of £1,595,235.65 per year.
The tenant argued that the wording of the rent review clause was so uncertain that the calculation could not be taken literally.
The tenant said the rent which should have been used in the calculation should have been £965,000; the lower rent from the original Lease. Furthermore, the base figure in the calculation was that from 2005 when the rent was £965,000 and there was no consistency with the figures.
The court however did not agree. It confirmed both parties entered into the subsequent Lease fully aware that the initial rent would be £1.2 million. The court held there was no ambiguity in the rent review clause. The court mentioned the fact that the term was an imprudent term for a party, or because it did not work in the parties favour is no warrant for arguing the clear language of the Lease.
This case highlights again why it is so important that both parties must be clear on which the reviewed rent should be calculated to ensure consistency in the Lease, especially if a reversionary lease has been entered to.

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