Upwards only rent reviews news

Ickendel Limited v Bewley's Café Grafton Street Limited

In a judgment published today the Supreme Court unanimously overturned the judgment of the High Court on the interpretation of a rent review clause affecting the lease of Bewley's Cafe on Grafton Street, Dublin. The judgment of Ms. Justice Laffoy centred on the interpretation of the Bewley's lease of 1987 providing for reviews at five-yearly intervals. This provision in the lease provided that on review, the revised rent would be equal to the greater of:

(a) the rent payable in the preceding period; and

(b) the rent ascertained in accordance with the terms of the lease being the full open market yearly rent.

High Court Decision of Mr. Justice Charleton

In his judgment, Mr. Justice Charleton acknowledged and agreed that he had no power to re-write an agreement but concluded as a matter of fact that the language of the lease was ambiguous and that he was obliged to interpret it having regard to what the parties had intended.  He found that in the rent review clause the term "preceding period" was not necessarily confined to the period immediately prior to relevant review date. He agreed with the tenant's contention that the calculation of the "preceding" rent should be made from the rent initially reserved in the 1987 lease and which he interpreted as the baseline below which the rent could not fall for the purposes of the 2012 rent review. He concluded that the references to 'open market rent' could accommodate a downward rent review.

The Landlord appealed the matter to the Supreme Court.

Supreme Court Judgment of Ms. Justice Laffoy

Ms. Justice Laffoy upheld the arguments of the Landlord and concluded that the Court's role is to construe the terms of the lease and that in this instance the lease was articulated in broadly conventional terms and those terms were unambiguous.

The Supreme Court's ruling on the matter in favour of the Landlord concludes that Bewley's had in fact entered into an upward only rent review, the nature of which ratcheted up on each upward review, and that the parties had not bargained for a rent revision based on market rent that can rise and fall in respect of different review periods but not below the rent first reserved by the lease.

Effect of Judgment on Rent Review Clauses

It could be said that the judgment of the High Court cast doubt over the effect of many similar rent review clauses in the market.  While the Supreme Court judgment clarifies the application of the rules of interpretation, Ms. Justice Laffoy indicated that this matter turned on its facts and arose from the specific terms of the lease. She stated that this case was concerned only with the proper interpretation of a specific clause in the lease and did not involve an issue of general application to rent review clauses. Notwithstanding this, the clarification afforded by the Supreme Court today is to be welcomed.

Gemma Ni Chaoimh, Solicitor, Property Department