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court delivers food for thought over lease renewals

6 June 2014

Iceland Foods v Castlebrook Holdings Ltd [2014] neatly illustratesthe balance which the court must strike when deciding on the terms of a renewal lease.

Iceland occupied the premises under a long lease. Upon expiry Iceland sought a renewal lease for a term of 5 years (Iceland wanted to maintain flexibility in, what were then, volatile market conditions).  The landlord wanted a new lease with a 15 year term on the basis that this was standard length in the supermarket sector – and the fact that a shorter term would adversely affect the value of the landlord’s reversionary interest in the premises.

The Court decided that an appropriate lease term would be 10 years – a half-way house between what the tenant and landlord wanted.

Whilst this is certainly not new law, the case provides a reminder that whilst the Landlord and Tenant Act 1954 is, in part, designed to protect business tenants the court will not simply grant the lease term sought by the tenant; instead in exercising its discretion the court must weigh up the interests of both parties, ensuring that it protects the tenant’s business but remaining fair to the landlord.

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