Kishenin (t/a Beiderbeckes Hotel And Restaurant) v Kalkstein-Bleach & Ors

An alleged tenancy is void for uncertainty where the rent for the period after an initial term is to be negotiated as an unspecified percentage of profits, without machinery for determining it. A court will not necessarily imply a reasonable rent merely because the parties contemplated continued occupation. A commercially agreed rent-free period may nevertheless be supported by consideration where the surrounding circumstances indicate that the grantor received a commercial benefit.

The claimant sought immediate possession of hotel premises and a declaration that he was the sole beneficial owner of the associated business. The court proceeded on assumed facts derived from the first defendant’s witness statement concerning an agreement for a company to occupy the property rent-free for one year, followed by rent to be negotiated as a percentage of profits.

The central issues were whether the rent-free period was supported by consideration and whether the alleged agreement for occupation after the first year was enforceable.

1. Consideration for the initial period. On the assumed facts, the court held that there was consideration for the one-year tenancy. The commercial purpose of allowing the defendants an opportunity to turn the business around provided sufficient indication that the claimant was to receive something of value. The judge said he would, if necessary, have ruled that the first year’s tenancy was supported by consideration, although that issue was not essential to the outcome.
2. Subsequent occupation. The alleged arrangement for any period after the first year was incomplete and void for uncertainty. The rent was to be determined by future negotiation as an unspecified percentage of profits, with no agreed percentage or other machinery for fixing the rent. Applying the approach in King’s Motors (Oxford) Ltd v Lax [1970] 1 WLR 426, the arrangement did not create an enforceable tenancy.
3. Distinction from King v King. That case, concerning a rent revision clause in an existing long lease, did not require a reasonable rent to be implied. It was distinguishable because here no rent had been agreed for the first year and later rent was to be negotiated by reference to an unspecified percentage of profits.
4. The first and third defendants therefore had no valid current tenancy and were required to vacate. The claimant was declared the sole beneficial owner of the business. The defendants were ordered to pay the claimant’s costs on the standard basis, subject to assessment if not agreed.