The High Court has refused an application for immediate possession of a supermarket property in Boyle, County Roscommon, in a dispute over whether a rent reduction agreed between the landlords and tenant binds the receiver appointed by the lender.
The ruling was made by Ms Justice Costello on an interlocutory application. She stressed that the court was not making final findings on the disputed facts or legal issues, which remain for a plenary hearing.
The property, known as The Crescent, was mortgaged to ACC Bank by Daniel and Olive Kennedy, who later leased it to Kellys Londis Supermarket Limited for 35 years. The lease, dated January 2004, set annual rent at €96,000 for the first five years, with later reviews. The mortgage required the Bank’s written consent before the property could be leased or part of it given out of the borrowers’ possession.
In January 2014, the landlords and tenant signed a side agreement reducing the rent to €30,000 a year. The tenant said it had paid rent in accordance with that agreement and was not in arrears. The lender’s agent said the Bank had not consented to the variation. After the borrowers failed to repay sums demanded in 2017, ACC Loan Management appointed Stephen Tennant as receiver. He sought the rent at the original rate and then applied for possession and related orders.
The judge noted that the plaintiffs did not seek interim relief on the basis that the original lease was not binding on the mortgagee or receiver. The receiver had demanded rent directly from the tenant and accepted a payment. On those circumstances, she said there was a strong case that the lease bound them.
The central question at this stage was whether the mortgage terms required the Bank’s consent to the 2014 rent variation. The judge said the mortgage expressly restricted granting a lease without written consent but did not expressly prohibit varying a previously approved lease. She considered there was a strong argument that the clause could not be extended to cover the variation by inserting words the parties had not used, while emphasising that the trial judge would decide the issue after a full hearing.
The court found that the plaintiffs had not established, on the affidavit evidence, that the tenant was in breach by failing to pay rent properly due. It therefore refused the reliefs sought in the notice of motion, including immediate possession. Whether the receiver is entitled to forfeit the lease and recover possession remains to be determined at the plenary hearing.