Issue of upwards only rent review clauses

Oct 7, 2013

Ickendel Limited –V- Bewley’s Café Grafton Street Limited, Respondent; [2013] IEHC 293
Date of Judgment 25th March 2013
Judgment of Mr. Justice Charleton

This case concerned the landmark building on Grafton Street, Dublin known as Bewley’s Oriental Café. The arbitrator who was appointed to review the rent referred the matter to the High Court and sought direction from the court as to the ambiguity of the clause.

The lease was entered into on the 22nd September 1987 and was for a term of 35 years, with rent reviews every five years. The rent was subsequently reviewed in 1992, 1997, 2002 and the last one was in 2007 during the height of the so called boom in the property market. This dispute arose when in 2012 the rent was due to be reviewed and Bewley’s sought a reduction in rent as opposed to an increase or stay as in previous reviews. In fact the rent had ballooned from it’s initial €213,000 to €1,463,964.

The lease was slightly ambiguous in it’s wording. Bewley’s argued that the initial rent in 1987 was to be a base line of which the rent could not go lower however the landlord argued the structure of the rent review clauses was such that it was ratcheted up step by step each review.

The Court in agreeing with Bewley’s allowed the rent to be reduced as there was ambiguity in the wording of the review clause that it could not be said with absolute certainty that rent was to be upwards only. What was clear was that the initial rent was to be a base line of which the rent could not go below.

The effects of this Judgment in terms of disputes between tenants and landlords over rent will mean that there will be room for negotiation when rent is up for review. Where previously thought that the rent review clause could only be reviewed upwards there is now a precedent set where rent may be lowered if the terms of the lease are ambiguous or where the rent is highly inflated and not a true reflect of open market value.

If you have a commercial premises and would like to discuss your rent review clauses please contact Martina Murphy on 061 303311 or [email protected]

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