Last month saw the Landlord and Tenant Act 1954 make a rare appearance before the appeal Courts. The case of Flanders Community Centre v London Borough of Newham (2016) was an appeal of a County Court decision in which the trial judge decided that the landlord was entitled to an annual rent of just £1.
The decision is important as it serves as a stark reminder of the importance of expert evidence in an unopposed lease renewal.
An unopposed lease renewal is where a lease of business premises has come (or is coming) to an end and the landlord and tenant are going through the process of agreeing a new one. The process is governed by the Landlord & Tenant Act 1954. This creates a statutory framework within which the Court can be asked to settle the lease terms in the event that parties cannot agree them.
It is only very rarely that the Court will be asked to determine the lease terms. The vast majority of unopposed lease renewals settle before trial. Rarer still, is for a case to make it all the way to an appellate Court. That is precisely what happened in the case of Flanders Community Centre v London Borough of Newham
The facts of the case go some way to explaining why.
In 2001, the London Borough of Newham (Newham) let a property to Flanders Road Community Association Limited (Flanders) to use as a community centre. The property was in a poor condition and the idea was that Flanders would carry out works of improvement. The lease contained a number of unusual and potentially onerous terms and effectively allowed the landlord to control how the premises were run. The lease was not therefore a typical commercial lease.
To reflect the unusual arrangement, the annual rent was set at just £1.
Unsurprisingly, upon the renewal Newham wanted to adjust the level of rent in the new lease and they proposed a rent of £23,000. Flanders wanted it to remain at £1. The parties could not agree so the case went to trial.
Where there is disagreement on rent, the Court will settle this in accordance with section 34 of the Landlord & Tenant Act 1954. This provides that:
The new rent will be the amount at which, having regard to the terms of the tenancy (other than those relating to rent), the holding might reasonably be expected to be let in the open market by a willing lessor, subject to certain matters that are to be disregarded.
This is generally regarded as meaning the same as an open market valuation. For this reason, expert evidence is key. However, it is for the Court to decide how much weight to attach to that evidence when determining the rent.
In this case, the County Court Judge was unimpressed by the evidence presented by Newham and concluded that it did not amount to reliable evidence of the current letting value of the property. On this basis, the Court looked at the current terms and decided that the new rent should be £1.
Newham appealed this decision to the High Court. They lost.
The High Court upheld the decision on the basis that the County Court was entitled to assess the evidence as it did and it is not the function of the appellate court to re-weigh the evidence and make a decision on the facts. That is what the trial court is for.
The decision is a stark reminder of the importance of having reliable and credible expert evidence. It also emphasises the importance of assisting the Court as much as possible in circumstances where the lease property is unusual as to its terms and comparable evidence is in short supply. It is not simply a case of listing comparable evidence.