Chancebutton Ltd & Anor v Compass Services UK & Ireland Ltd

A rent review clause is construed by ordinary principles, in its commercial context and in light of its purpose. There are no special rules for rent review clauses. A presumption of reality supports assuming that the premises and lease are as they actually exist, unless clear words or necessary implication require otherwise. Where the clause refers to a hypothetical term equal to the term originally granted, that ordinarily means a term beginning on the original commencement date and having the original duration, rather than a new term beginning on the review date.

The claimants sought a declaration concerning the meaning of a rent review clause in a lease of office premises. The clause required Current Market Rent to be assessed on the assumption of a letting at the review date for a term equal to the term originally granted.

The parties disagreed whether the hypothetical term was the original 25-year term commencing on 24 June 1982 or a new 25-year term commencing on the 24 June 2002 review date.

1. Declaration granted. The hypothetical term was a term commencing on 24 June 1982 and lasting 25 years less one day.
2. The clause was construed by ordinary principles, having regard to its language, context and commercial purpose. The purpose of rent review was to update rent by reference to market conditions, not to assume the grant of a wholly new lease.
3. The presumption of reality was an aspect of commercial construction, not a mechanistic rule. The natural meaning of a term equal to the term originally granted included the original commencement date and duration.
4. A term of 25 years commencing on the review date would not be equal to the term originally granted and would create an unjustified departure from reality. The declaration sought by the claimants was therefore granted.