- Correcting a mistake in an RPI rent review clause (Monsolar IQ Ltd v Woden Park Ltd)
- What are the practical implications of this case?
- What was the background?
- What did the court decide?
- Was it clear that the RPI rent review provision contained a drafting error?
- Was it clear how the error should be corrected?
- Case details
Property Disputes analysis: A court will not alter an unambiguous contractual term merely because it is unduly favourable to one party, imprudent or unreasonable or because it provides for one party to pay too high a price for something. However, a court can correct the literal meaning of a contractual provision by construction if it is clear both that a mistake has been made and what the provision was intended to say. This case concerned a rent review clause which, read literally, would cause the rent to be increased each year by an amount reflecting the cumulative change in the Retail Prices Index (RPI) since the start of the lease (rather than by an amount reflecting the change in the RPI from the previous year). Using one set of figures provided by the tenant, this would mean that an initial annual rent of £15,000 would increase to just over £76m by year 25 of the lease. Lord Justice Nugee had no doubt that a literal interpretation produced results which could be described as arbitrary, irrational, commercially nonsensical or absurd. On that basis, the Court of Appeal decided that the rent review clause contained a clear drafting error which it felt able to correct by construction. Written by David Harris, professional development lawyer at Browne Jacobson LLP.
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