Coors Holdings Ltd v Dow Properties Ltd

For rent review purposes, the prima facie rule is that the whole of the demised premises, including buildings, is valued. The parties may depart from that rule if the lease, construed against its relevant factual background, discloses a sufficiently clear contrary intention. A reference to the “site comprised in the demised premises” may exclude buildings where the language and commercial context support that construction. The fact that the tenant constructed the buildings at its own expense is highly relevant, particularly where construction formed part of the bargain for the grant of the lease. Standard provisions concerning repairs, improvements and rent abatement may be contra-indications, but their significance depends on the whole instrument and factual matrix.

The claimant held a long lease of a public house granted by the London Borough of Islington. The lease provided for upward-only rent reviews by reference to the open market rental value of the “site comprised in the demised premises”. The premises were defined as land together with the public house, which had been constructed by the original tenant at its own expense under the agreement for lease.

The reversion was subsequently acquired by the defendant. The parties sought construction of the rent review provisions, specifically whether the valuation was to include the buildings or the land alone. The claim was brought under CPR Part 8.

1. Declaration granted. The rent review provisions required valuation of the site alone, excluding the public house buildings.
2. The starting assumption was that rent review valuation concerns the whole of the demised premises, including buildings. That assumption is only a starting point. It may be displaced where the language of the lease, read in its relevant factual context, shows a sufficiently clear contrary intention.
3. The phrase “the site comprised in the demised premises” naturally referred to the land and excluded the buildings. Otherwise, the words “site comprised in” would add nothing to the existing defined term “demised premises”.
4. The construction was reinforced by the fact that the tenant had built the public house at its own expense, that construction being an essential part of the bargain for the grant of the lease. The low initial rent was not a powerful factor because it had several possible explanations.
5. References to the lease terms, improvement and occupation disregards, repairing obligations and rent abatement provisions were potential contra-indications. They were not sufficiently strong to overcome the deliberate wording of the rent review definition. Some appeared to be standard provisions inserted without sufficient regard to the lease’s particular terms.
6. The alternative argument concerning whether construction of the public house was a disregarded improvement was not decided because the site wording was sufficient to resolve the issue.
7. The court noted a potential difficulty where a lease is construed by reference to background facts unknown to successors in title, but no such lack of knowledge was alleged here.

Costs were awarded to the claimant, subject to excluding the cost of its unused expert report. Interim costs of £10,000 were awarded, stayed for six weeks. Permission to appeal was refused.

First-instance decision. No prior appellate decision is stated in the judgment.