The dispute centres on a 25-year lease, with five yearly upward only rent reviews signed by Homebase in 1985. The lease terms also required the tenant to pay for all repairs, to maintain the property to a specified standard and to sublet it to another tenant only with the landlord's permission.
But in 1998, Homebase decided it no longer wished to occupy the premises, for which it was paying annual rent of £322,500, and moved out despite having 12 years remaining on the lease. A year later the retailer signed a sub-tenancy deal with Lairdale who was willing to pay only two-thirds of the rent being asked.
The sub-lease appears to expose Allied Dunbar to risks it had not counted on when it agreed to let the unit to Homebase and the fund sought an injunction preventing the sublet.
The Court of Appeal upheld the view of Allied Dunbar and ruled that Homebase could not sublet at less than the market rent. Now the retailer is appealing to the highest court in the country, the House of Lords. The outcome will dictate the degree of flexibility in lease terms.
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