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Landlord Sees Off ‘Sham’ Comparable Rent Accusation

Making comparisons between similar properties is the standard means of assessing appropriate levels of rent payable on commercial premises. The practice came under scrutiny by the Court of Appeal as a landlord defeated claims that it had entered into a sham lease at an artificially inflated rent in an attempt to push up its returns on other properties that it owned.

One of the landlord’s tenants had made an unopposed application for a new lease under the Landlord and Tenant Act 1954 but objected when the rent payable was fixed by a judge at £125,700 per annum. The judge had in part based his decision on the rent achieved by the same landlord in respect of another property.

The tenant argued that that transaction was a sham and that the comparison put forward by the landlord was artificial and unreal. It was said that the relevant premises had remained empty and in a dilapidated state since the rent was said to have been agreed and that the tenant was a dormant, non-trading, company.

The landlord denied the accusation that it had engaged in a ruse in an attempt to force up rents in an area in which it had substantial property holdings. In dismissing the tenant’s appeal, the Court noted that its arguments had been fully considered, and rejected, by the judge. Fresh evidence of alleged skulduggery that the tenant sought to put forward could either have been presented to the judge or was of no real substance. An appeal by the tenant had also previously been dismissed by the High Court.