Upward rent reviews and arbitration

In the current economic climate, upward rent reviews are few and far between.  However, if you do find yourself involved in a rent review arbitration, you should remember the lesson learned by the tenant in the recent case of Cordoba Holdings –v- Ballymore Properties.

Ballymore (the landlord) sought an upward review of the rent paid by Cordoba for the occupation of a data centre.  As is common, tenants’ improvements were to be disregarded for the purpose of the review.  Cordoba had substantially upgraded the power supply so the building could be used as a data centre.  However, their surveyor had not produced any direct evidence to this effect in his valuation report used during the arbitration.  The Arbitrator accordingly assessed the rent of the building on its current use as a data centre.  Cordoba did not think this to be fair and appealed the arbitration award on the basis that the Arbitrator had failed to take into account the issue of the tenants’ improvements.

The appeal to the High Court failed.  The surveyor’s report had not expressly referred to tenants’ improvements so the issue had never even been put to the Arbitrator.  The Arbitrator’s decision was therefore sound on the basis of the evidence and arguments put before him.  This was an expensive mistake (which we suspect will have repercussions so far as the surveyor is concerned).  This shows that a rent review arbitration is far from a cosy, informal procedure.  Specialist advice should be taken.

Holmes & Hills Solicitors provide clients with expert advice and representation relating to commercial property disputes. Click the link for more information on the service Holmes & Hills provides to landlords and occupiers.