Level Properties Ltd v Balls Brothers Ltd & Anor

A contractual condition governing when a tenant may seek consent to assign is distinct from a condition imposed when consent is being considered. Section 19(1) of the Landlord and Tenant Act 1927 invalidates the latter if it restricts the statutory protection against unreasonable refusal, but does not invalidate the former. A rent-review expert appointed to determine rent by reference to contractual criteria does not ordinarily have exclusive jurisdiction to construe the lease. The parties remain able to challenge a determination based on an erroneous construction of the lease, while remaining bound by other parts of the determination.

The claimant landlord granted a 16-year lease to Benjys Group Limited, which assigned it to the first defendant. The lease required the landlord’s consent to assignment and contained provisions concerning sureties. It also provided for rent review, with an independent expert to determine the open-market rent by reference to detailed contractual assumptions and disregards.

The claimant sought determination of preliminary issues concerning whether a surety could be required, whether the rent was to be assessed by reference to separate lettings of the ground floor and basement, and whether the parties were bound by the expert’s determination, including any erroneous interpretation of the lease.

1. Issue 1. The requirement in clause 3.13.3.3 that a limited-liability assignee provide a surety was a condition precedent to the tenant’s entitlement to apply for consent. Clause 3.13.3, read in the context of the lease as a whole, identified the alienations which were not absolutely prohibited and the circumstances in which consent could be sought. It did not prescribe a condition which the landlord could impose when deciding whether to consent, or a circumstance in which refusal would be deemed reasonable. Section 19(1) of the Landlord and Tenant Act 1927 therefore did not invalidate the provision. Issue 1 was answered in the affirmative.

2. Issue 2. The open-market yearly rent had to be assessed on the basis of two lettings, one of the ground floor and one of the basement, if that produced a higher rent. The relevant clauses had to be construed as part of the lease as a whole. The distinction between terms which operated where the context required and the express provision that singular words included the plural supported that construction. The words were clear, so no further rule of construction was needed.

3. Issue 3. The independent expert had to determine the rent by applying the contractual assumptions, disregards and other criteria in the rent-review clause. The clause did not confer sole and exclusive power to construe the lease. The parties were not bound by any part of the determination based on an erroneous interpretation of the lease, although they remained bound by parts based on matters other than such an error.

4. The parties’ conduct in making submissions to the expert did not establish an implied agreement to be bound by his interpretation, however erroneous.