Conferring Exclusive Jurisdiction On Experts In Rent Review Disputes
By Barry Edgar, Gareth Hale and Lisa Cruickshank
In two recent Scottish cases, the Court of Session has considered the question of whether – and, if so, under what circumstances – a lease can make rent review disputes the exclusive jurisdiction of an independent expert, with the result of excluding challenge through the courts.
Ashtead Plant Hire Company Limited v. Granton Central Developments Limited (Ashtead) In Ashtead, a lease of a warehouse and surrounding land in Granton, Edinburgh provided for the level of rent to be reviewed every five years, on an open market basis. As is extremely common, the lease said that if the landlord and tenant were unable to agree upon the open market rent at any rent review, an independent expert should be appointed to determine the figure. The lease stated that the decision of the expert would be "final and binding" on the parties to the lease. At the 2017 rent review, the landlord and tenant found themselves unable to agree on the open market rent figure. This was primarily because they had differing views on how a specific provision of the rent review clause should be interpreted, namely a statement that, in calculating the open market rent, there should be disregarded "the effect on any rent of the value of any buildings or other constructions erected on and any improvements carried out to the subjects of lease". The tenant argued that this meant the open market rent should be calculated on the basis of the ground only, disregarding all buildings, constructions and tenant's improvements on it. The landlord on the other hand argued that the disregard was only intended to prevent rentalisation of any improvements carried out by the tenant, meaning that the buildings which existed at lease commencement could and should be taken into account. At the 2017 rent review, the landlord and tenant found themselves unable to agree on the open market rent figure. This was primarily because they had differing views on how a specific provision of the rent review clause should be interpreted, namely a statement that, in calculating the open market rent, there should be disregarded "the effect on any rent of the value of any buildings or other constructions erected on and any improvements carried out to the subjects of lease". The tenant argued that this meant the open market rent should be calculated on the basis of the ground only, disregarding all buildings, constructions and tenant's improvements on it. The landlord on the other hand argued that the disregard was only intended to prevent rentalisation of any improvements carried out by the tenant, meaning that the buildings which existed at lease commencement could and should be taken into account. Before the dispute reached the stage of an expert being appointed, the tenant raised a court action seeking a declarator that the open market rent should be calculated on the basis of the ground only, disregarding all buildings. In response, the landlord argued that because the lease provided for reference to an expert (whose decision would be final and binding) in the event of a rent review dispute, the court had no jurisdiction to decide the matter, as it was within the exclusive jurisdiction of the expert. Both the parties and the court agreed that in theory it would be competent to remit exclusive jurisdiction to an expert - not just on factual valuation matters, but also on legal matters such as the correct interpretation of the rent review