[2025] UKUT 224 (LC)

This property forms part of an eight-storey office building completed in 2016. It is located in the Spinningfields area of Manchester, on the western edge of the city centre near to the River Irwell. The building has a reception and restaurant on the ground floor and two levels of car parking in the basement. The total area occupied by Shoosmiths is 2,839.8m² split between the 5^th floor at 1,062.4 m² and 6^th floor which extends to 1,777.4 m².

The property was let in a shell condition and the fitting out was undertaken by Shoosmiths to their own specification. The landlord provided £1,091,169 towards the cost of the works to take the floorspace from shell condition to Category A together with a further sum of £97,220.50 for floor boxes and carpets. The landlord made an additional capital contribution of £1,673,171 but without specifying what it should be spent on. A further sum of £49,000 was provided to facilitate the construction of an internal staircase. The total spent by the tenant on fitting out was £2,766,583. Ms Wigley KC deducted from that sum the sum paid by the landlord for the Category A works, to give a figure of £1,675,414 paid by the tenant for the Category B works. Mr Bailey in his report subtracted, instead, the actual cost of the Category A fitting out which he took to be £1,168,613, which gives a figure of £1,597,970 for Category B. As we shall see, that difference in calculation does not matter so far as the VO is concerned because her argument is that the appropriate figure to use is the landlord’s contribution.

The two floors are occupied under two 15-year leases which both commenced on 25 January 2017. There is a separate arrangement for car parking spaces. The respective headline rents for the Part 5^th Floor and 6^th Floor are £323,460 and £542,025 per annum. Both rents are subject to fixed increases at the 5^th year of the lease to £357,124 and £598,435 per annum.

As an inducement to take the lease, the landlord granted 4 months’ rent free followed by a rental discount of 50% for a period of three years.