Wednesday 22 October 2014

Bewley’s loses out in Supreme Court rent rate case

Decision means Bewley must continue to pay the €1.46m rent up to 2017

Published 01/07/2014 | 11:59

Bewley’s on Grafton Street.

A company owned by developer Johnny Ronan has won its Supreme Court appeal against a ruling that the €1.46m annual rent for Bewley's Cafe in Grafton Street must be allowed fall to reflect market rates.

The decision means Bewley must continue to pay the €1.46m rent up to 2017 and the cafe company said today it was "immensely disappointed" with the outcome.

The "oppressive" rent payable to Ickendel Ltd, part of the Treasury Holdings Group whose loans have been transferred to NAMA, was double the market rent set in January 2012, it said.

The dispute required construction of the terms of a 1987 lease between Bewley's and Ickendel with built in rent reviews every five years.

The case was taken after Bewley's rent doubled to €1.46m at its last rent review date of January 1st 2007 which Bewleys argued, reflected the peak of the "unsustainable property bubble". 

All Bewleys had sought was "an acknowledgement of the economic reality and fair treatment with a rent that reflects market values, but this had been blocked by NAMA and the landlord," it said in a statement after today's ruling.

A five judge Supreme Court today unanimously allowed the appeal by Ickendel against the March 2013 High Court decision of Mr Justice Peter Charleton in favour of Bewleys.

Bewleys had claimed its lease allows rents to fall as well as flucuate upwards while Ickendel claimed the terms meant rents cannot fall. The High Court heard various reports indicated commercial retail rents have fallen by over 50 per cent while a 2013 judgment in the Circuit Court fixed a new rent on a Grafton street property at just 53 per cent of the previous rent.

Ickendel argued the Bewleys lease provided for a term of 35 years with five yearly reviews from January 12th, 1992. The parties intended there would be six successive five year periods for which the rent could be reviewed and the lease could not be construed as having any other effect, it contended.

Giving the Supreme Court judgment, Ms Justice Mary Laffy upheld the arguments of Ickendel concerning how the lease should be construed.

The court was concerned with construing rent review provisions in a commercial lease which, broadly speaking, are articulated in conventional terms, she said.  If Ickendel was correct, the rent payable was €1.46m but if Bewleys was correct, it was some €728,187.

She ruled the terms of the lease meant the yearly rent payable from January 1st 2007 to December 31st 2011 was some €1.46m and continues to be payable by Bewleys for a five year term from January 2012. 

The parties did not bargain for a rent revision arrangement based on a "market rate" that can rise and fall in respect of different review periods, she found.  The end result of the various provisions of the lease was an "upwards only" review notwithstanding it was not expressed in those terms.

The judge added the case arose from the specific terms of this lease and did not involve an issue of general application.  The case was concerned with a specific clause in the lease set in its specific context, she said.

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