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Due to a disagreement in rent, Ngee Ann City mall’s landlord sued its anchor tenant, department store Takashimaya.
In a hearing that began on Tuesday (29 March), both parties sought the intervention of the High Court as they cannot agree on the interpretation of a 2014 contract on how the rental rate would be determined.
Ngee Ann Development inked an agreement with Takashimaya in 1993, whereby the latter will lease space at the mall for 20 years, with six options to renew its tenancy for 10 years each. The rental rate will then be reviewed every five years, but if both parties cannot reach a consensus, it will be decided by a property valuer.
After the end of the 20-year initial lease, Takashimaya exercised the first option in 2013 and Ngee Ann proposed to raise the monthly rent from S$8.78 per sq ft to S$19.83 per sq ft, citing a valuation report based on a revised mall layout with lower department store space and larger areas for specialty shops, which usually command pricier rents.Takashimaya then rejected valuation report but agreed to select one valuer each and use the average of the two valuations. They also agreed to keep each other in the loop regarding any documents they send to the valuers.
According to a report by The Straits Times, Takashimaya then rejected valuation report and agreed to select one valuer each and use the average of the two valuations. They also agreed that both parties will be informed of any correspondence to the valuers.
However, Ngee Ann sent a letter to the valuers instructing them to use a hypothetical layout without informing Takashimaya, which the Ngee Ann said was an “administrative oversight.”
Ngee Ann sued Takashimaya to make them follow the agreement that both reports should be used as the basis for the rental revision, but the tenant contended that the rental value must be determined taking into account the mall’s existing configuration.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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