Bill Chandler's article Deceptively simple, which was originally published in Estates Gazette and subsequently featured in the winter 2017/18 edition of our commercial property newsletter, was recently referred to by the Court of Appeal in Monsolar IQ Ltd -v- Woden Park Ltd.
In order to avoid the 'absurd' outcome of its rent rising from £15,000 to potentially £76 million over the 25-year term, Monsolar had to convince the court that the index-linked rent review clause in its lease contained a clear mistake and that it was obvious what the clause should say.
The alleged mistake - calculating the increase in RPI since the start of the term on each review, but applying that increase to the passing rent - fell squarely within one of the common mistakes identified by Bill's article. The fact that there were two ways of redrawing the clause to correct the mistake was not fatal, since both approaches led to the same mathematical outcome so far as the ultimate rent was concerned.
After some harsh decisions on the interpretation of formula-based clauses in recent years, this case will give comfort to tenants that obvious mistakes in index-linked rent review clauses may still be corrected. Although, obviously, it is far better to get the clause right at the outset.
Bill's article advocates the use of worked examples to eliminate mistakes and evidence how the clause is supposed to work. By happy coincidence, the Monsolar judgment was published just four days after Model Commercial Lease adopted a worked example that Bill had submitted to them for inclusion in their precedent index-linked rent review clause, covering the most complex scenario of a compounded rent review with cap and collar.
You can read Bill's original article here.
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