Lawbite:Language, context and background knowledge should not to be disregarded

• United Kingdom

• Litigation and dispute management
• Real estate litigation

11-02-2019

Ashtead Plant Hire Company Limited v Granton Central Developments Limited [2019] CSOH 7

This case involves a landlord and tenant dispute over the proper construction of the rent review provisions in a lease of commercial premises. 

The parties agreed that the leased premises were a combination of land and buildings.  What was in dispute was the effect of a specific disregard that had been added into the lease by a variation.

It stated that the valuation of “open market rent” should be calculated disregarding “the effect on any rent of the value of any buildings or other constructions erected on…the subjects of the lease”.  The question was whether this meant that buildings already present on the premises at the outset of the lease should be disregarded for the purposes of a rent review calculation. The lease term ran to 2096 so the outcome was significant. 

The court restated the general principles of contractual interpretation and it was also referred to four English cases on rent review provisions. Both parties accepted that the general rule for valuation of the ‘open market rent’ is that the valuation includes any buildings as well as the land but that this rule could always be contractually displaced.  

Ultimately the court’s decision was that the disregard at issue was effective to exclude the existing buildings or other constructions on the premises for the purpose of deciding open mark rent.  Lady Wolffe confirmed that she had reached her decision by applying the general legal principles for construction of contracts and she had not relied on the four English cases cited.  However she noted that the cases were consistent with her decision.

Key points

assumptions and disregards are common in rent review clauses.  Their aim is often to ensure that an open market valuation is achieved by, for example, preventing one party being disadvantaged by the other’s breach of the lease obligations or their own occupation of, or improvements to, the premises

always check the language of a rent review clause precisely and test any variations scrupulously against the possible circumstances that may arise

the extent to which the Scottish courts will rely on English case law will depend on the circumstances of the dispute