A recent decision in the County Court (S. Franses v Cavendish Hotel) confirms the relevant factors for determining the amount of the annual rent payable on a new lease under the Landlord and Tenant Act 1954.

Before a Court may make an award as to the level of rent payable under the renewal lease, the parties must agree (or the Court will order) (a) the extent of the property to be comprised in the tenancy; (b) the length of the tenancy; and (c) the other terms of the lease.

In this case, the tenant was in occupation of the property pursuant to two separate leases. The passing rent under the previous aggregate leases was £220,000 per annum. Both parties’ experts submitted their own rental valuations to the Court, with the Landlord’s expert calculating that the market rent should be £174,750 p.a., and the Tenant’s expert putting forward a much lower figure of £96,500 p.a.

After considering the evidence of both experts, the Judge awarded a new rent of £102,000 per annum.

This Judge made the following adjustments:

• A 5% uplift was awarded on the basis that the property had a return frontage.
• A 20% discount was ordered on the basis that the property had a width (frontage) longer than the depth.
• A 20% discount was ordered on the basis that the new lease contained a restrictive user covenant.
• A 5% discount was ordered to reflect the terms of the alienation provisions.
• A 2.5% discount was ordered on the basis that the landlord had potentially wide rights of entry to enter the property to effect work.

• A 2% discount was ordered to recognise the tenant’s inability to undertake works to the exterior of the property (notwithstanding that the tenant could do works in accordance with the Landlord and Tenant Act 1927, and improvements effected in accordance with this Act would override any contractual prohibition to do works).
• A 5% discount was ordered to reflect the fact that the term of the new lease was for 15 years.
• The question of the provision of a rent-free period in the market also resulted in a further discount to the rental figure awarded.

This is an interesting case, which shows how factors which are disregarded for the purpose of a contractual rent review do, in fact, form part of the Court’s consideration when determining a rent on renewal under the 1954 Act, and how the physical characteristics of the property and particular lease terms affect the level of rent payable under the new lease.