Watergate Properties (Ellesmere) Limited v Securicor Cash Service Limited (2005)
An arbitrator's decision, that on the true construction of a lease supplementary rent was required to be deducted from his determination of the yearly rental value, was obviously wrong.
The appellant landlord (W) appealed against an arbitrator's determination that supplementary rent was to be deducted from the yearly rent. W leased land and commercial premises to the respondent tenant (S). The lease contained a rent review clause that specified that the market rent was to be "the rent at which the...premises...might reasonably be expected to be let in the open market...by a lease for a term equivalent to the then unexpired residue of the term...created with vacant possession". Another clause provided that in addition to the initial rent and the market rent S should pay to W "a supplementary rent...during the first fifteen years of the term demised such supplementary rent not to be subject to the reviews referred to...". An arbitrator was appointed to determine the rent from the review date and determined that the hypothetical lease referred to in the rent review clause should be considered to contain the supplementary rent requirement for the first 15 years. The arbitrator proceeded to deduct the supplementary rent from his determination of the yearly rental value and produced a market rent. W argued that the arbitrator's decision was obviously wrong and sought a variation of the award.
In the absence of clear words to the contrary, the terms of a rent review clause should be based on those terms still subsisting between the parties. The hypothetical lease would reflect the reality that the supplementary rent was no longer payable. The arbitrator's decision was obviously wrong under the Arbitration Act 1996 s.69 and the award was varied by removing the amount of the arbitrator's deduction.
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