Australia: Landlord unsuccessful in challenging independent rental valuation of commercial premises - 122 Pitt Street v Universal 1919

Last Updated: 1 June 2015
Article by Gary Newton

In brief - Landlord unable to prove deficiency in rental valuation and thus bound by it

In the recent case of 122 Pitt Street v Universal 1919, the landlord unsuccessfully challenged the rental value determination of an independent valuer. The NSW Supreme Court found that the parties were bound by the valuer's determination and rejected the landlord's rent proposal.

Landlord proposes new base rent and tenant requests rent valuation

The case 122 Pitt Street Pty Ltd ACN 104 825 961 v Universal 1919 Pty Ltd [2015] NSWSC 234 concerned a lease made on 20 May 2004, which stipulated that the landlord leases the basement, ground floor, mezzanine level and level 1 of 122 Pitt Street, Sydney to the tenant. The lease was for an original term of 10 years, terminating on 31 May 2014, with an option for a further 10 years. The tenant exercised this option.

The landlord proposed a new base rent for the leased premises in excess of $1,000,000 per annum. The tenant invoked the rent dispute mechanism under the lease, which allowed for a market review of the base rent by an independent valuer who would determine the current market rent for the premises. This would become the new base rent.

The valuer who was appointed made a determination of the market rent, submitted on 1 June 2014, which was approximately $500,000 less than the annual rental figure proposed by the landlord.

The landlord claimed that there was a deficiency in the determination, as the lease contained specific provisions about how the valuer was to determine the market rent for the premises. These included the injunction in clause 5.9 that the valuer should "disregard the value of any goodwill attributable to the Tenant's Business and the value of the Tenant's Fixtures or fitout". The landlord based its claim on the fact that the valuer made it clear that he had taken into account the tenant's obligation under Clause 28.5.3 of the lease to spend a minimum of $1,000,000 on what was described as "fitout work".

Did the valuer breach the provisions outlined in the lease?

The key issue the court had to tackle was whether or not the valuer had breached the provisions outlined in the lease. If he had not, then the determination would stand and would become the new base rent. If he had, then the court would have directed the parties to restart the mechanism under the lease with the nomination of a valuer by the President of the NSW Division of the Australian Property Institute. It would have been solely the President's decision whether to nominate the same valuer again or somebody else.

Relationship between "fitout" and "fitout work"

The court applied the approach set out by the High Court in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7, that "the meaning of terms of a commercial contract [are] to be determined by what a reasonable businessperson would have understood those terms to mean". This led the court to conclude that "fitout work" is distinct from "fitout", with the latter being the product of the former. Consequently, the court found that the landlord and tenant are bound by the determination.

The court also found Clause 28.6.2"... unless the Landlord otherwise requires, remove the Fitout Work and the Signage..." to be constructed poorly. Given the specific definition of "fitout work" assembled by the court, the court deemed its inclusion in the clause absurd, as one cannot "remove" work that has been done. What the parties intended it to mean cannot be determined and thus the court rejected the provision.

Difference between "spending" and "value"

If, however, the court had found that "fitout" is classified within "fitout work", there is an alternative basis on which the court could have found that the valuer complied with Clause 5.9(a).

The valuer had taken into account the tenant's obligation to "spend a minimum of $1,000,000 on the fitout work". Clause 5.9(a) required the valuer to disregard the value of specific things. The court concluded that the valuer took into account an obligation to spend, but not the value of the result of the expenditure and hence was not in breach of the provision.

This case analyses the proper meaning of "value" and the court clearly differentiates between value and cost. "Cost" is what one has spent on something; it does not equate with "value", which is what something is worth.

Court's ability to disregard non-coherent provisions

The court also delves into the importance of parties constructing coherent contracts, demonstrating that if there are "bespoke provisions", then it may be necessary for the court to modify the strict wording and even reject words or whole provisions.

Potential of market rent determinations to differ from expectations

This case shows that in the situation of a market rent determination, there can be an enormous difference between what the valuer determines and what the parties may have expected.

The lesson here for tenants is that if your landlord proposes a new base rent which you believe is excessive, it is worth making use of the rent dispute mechanism under your lease to have an independent valuer appointed to determine objectively what the current market rent is for your premises.

Furthermore, before tenants enter into a lease with a landlord, they should ensure that it contains an adequate rent dispute mechanism.

The lesson for landlords is that proposed increases in base rent should be based on a realistic assessment of what the market rent is for the premises and the provisions of the lease. Landlords who merely pluck a number from the air are likely to find their tenants using the rent dispute provisions of the lease to challenge the proposed increase.

Gary Newton
Leasing - commercial and retail
CBP Lawyers

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Gary Newton
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.