Can't Agree a Commercial Rent? Court Steps In

Calculation of commercial rents is more of an art than a science and disputes are sadly common. However, as one case involving a Polish-themed bar in Central London showed, judges are always there to promote peace if negotiations fail.

Following the grant of a new lease in respect of the premises, an issue arose as to the appropriate rent payable. After an attempt at arbitration failed, the matter was referred to the High Court. The landlord contended for an annual rent of £35,000, but the tenant argued that it should pay no more than £21,800. It was agreed that the rent should be assessed on the basis of the profit that could be generated by the reasonably efficient operation of the bar.

The tenant pointed out that the premises were invisible from the main road, being tucked away in a dog-legged alleyway, and therefore did not attract passing trade. The bar had been adversely affected by heat generated by air conditioning units installed to serve neighbouring properties and large trolleys left in its access way by a nearby supermarket. The bar's trade was said to have been improved by its adoption of a Polish theme.

On the other hand, the landlord submitted that the bar could be run more profitably as an English pub, wine bar or microbrewery and the tenant had failed to take steps, including additional advertising, that could improve the bar's takings.

Whilst acknowledging that the bar's turnover had declined in recent years, the Court noted that it was not immune from the general downturn in the licensed trade. The tenant was operating it with reasonable efficiency and the Court fixed the rent at £27,000 per annum. That figure was based on 50 per cent of the annual profit that the bar could be expected to generate.