Supreme Court Clarifies 'Upwards Only' Rent Review Provisions For Bewley’s

Author:Ms Cara O'Hagan, Brian Doran, Nicola Dunleavy, Ronan McLoughlin and Patrick Sweetman
Profession:Matheson
 
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Matheson represented Ickendel Limited, the landlord of Bewley's Oriental Café on Grafton Street, Dublin (Bewley's Café), in a successful Supreme Court appeal regarding the meaning of rent review provisions in the lease of Bewley's Café. The judgment of the Supreme Court on 1 July 2014, confirmed that the particular rent review clause is "upwards only".

The judgment provides welcome clarity on the effect of rent review provisions that were once the market standard and which still apply to many premises occupied under older forms of leases.

Background

Legislation enacted in 2009 prohibits "upwards only" rent review provisions in commercial leases entered into after 28 February 2010. As the prohibition is not retrospective, many tenants have been closely scrutinising their pre-March 2010 leases, with a view to reducing their rent by other means.

This case concerned the interpretation of the rent review provisions in the lease of Bewley's Café, which was granted in 1987 subject to an initial yearly rent equivalent to circa €213,000. The lease provided for a review of the rent every five years, and on the review that occurred in 2007 the rent was fixed at €1,463,964 per annum. When the rent became due for review again in 2012 market rents had dropped considerably and the tenant, Bewley's, sought to have the rent reviewed downward to market levels.

The lease provides that the rent after each review date shall be equal to the greater of "the rent payable hereunder during the preceding period" or the market rent.

The landlord, Ickendel Limited, claimed that the rent review provisions required the rent to step up, or to remain at the level payable in the preceding period of five years, on each review date. Such clauses are commonly referred to as "upwards only" rent review provisions, although this is somewhat a misnomer as the rent can remain unchanged following review.

Bewley's claimed that the rent review provisions were ambiguous, and that in the context of the entire lease the rent review provisions operated as a "threshold clause". Bewley's submitted that on each review the rent should be fixed at the market rent, even if this resulted in a decrease in rent, provided that the rent could not be reduced below the "base line" of the "initial rent" in 1987.

High Court Decision

In his judgment in the High Court, Judge Charleton held he was not entitled to rewrite what the parties had agreed, either in the guise of sympathy for either party's...

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