Trans-World Investments Ltd v Dadarwalla

For fixing rent under section 34(1) of the Landlord and Tenant Act 1954, the passing rent and rent payable for a comparable adjoining property are relevant valuation evidence. The court need not require positive evidence explaining how those rents were negotiated before taking them into account. A party seeking to show that either rent is irrelevant must adduce evidence of the circumstances relied on. In the absence of such evidence, the rents cannot be disregarded in determining the hypothetical open-market rent.

The landlord appealed from an order of HHJ Copley in the Willesden County Court fixing the annual rent for a renewed business tenancy of a lock-up shop at £3,937.50. The parties had agreed all other lease terms. The judge had excluded the passing rent and the rent of an adjoining shop because there was no evidence about how those rents had been negotiated. The appeal concerned whether those rents were relevant evidence under section 34(1) of the Landlord and Tenant Act 1954, and whether the matter should be remitted for the market rent to be reconsidered.

Lord Justice Mummery gave the judgment, with which Lord Justices Keene and Jacob agreed.

1. Disposition. The appeal was allowed. The question of the market rent was remitted to the Central London Civil Justice Centre, Chancery List.
2. Statutory valuation. Section 34(1) of the Landlord and Tenant Act 1954 directs an objective assessment of the rent at which, having regard to the tenancy terms other than rent, the holding might reasonably be expected to be let in the open market by a willing lessor. The matters required to be disregarded did not include the rent payable under the previous lease (paras [2]-[3]).
3. Relevant evidence. The judge was clearly wrong to exclude both the passing rent and the rent of the comparable adjoining property at No 106 merely because there was no evidence of the circumstances in which those rents had been negotiated. Both were relevant valuation evidence. The party relying on such evidence need not first produce positive evidence explaining the negotiations (paras [27]-[30]).
4. Burden of challenge. It was for the party challenging the relevance of either rent to adduce evidence showing why it should not be used in the valuation exercise. The tenant had produced no such evidence. The exclusion of the rents therefore materially undermined the valuation, requiring a remittal rather than a fresh valuation by the Court of Appeal (paras [30]-[32]).
5. Costs. The tenant was ordered to pay the landlord’s appeal costs, assessed at £15,224.03 inclusive of VAT. Costs below were reserved to the judge conducting the remitted hearing (para [33]).

• Court of Appeal (Civil Division) — [2007] EWCA Civ 480. Appeal allowed and the market-rent issue remitted.
• Willesden County Court — HHJ Copley ordered on 18 July 2006 that the annual rent for the renewed tenancy should be £3,937.50 for the first five years.