Lessee’s fitout is usually not included or contested in an assessment of premises rental value. This matter included an obligation on the Lessee to spend a minimum of $1 million on fitting out the leased premises which comprised an iconic commercial building in the Sydney CBD, formerly part of ‘Millions House’ including the Vault Hotel.
A NSW Appeal Court had to contemplate setting aside a Market Rental Determination by an appointed Valuer on the basis of whether or not the Valuer had breached the provisions outlined in the lease.
The lessor argued that the Valuer wrongly took into account the “value of the tenant’s Fixtures or fitout” by having regard to the value of the fitout work that the lessee was required to do under the lease after the market review date in order to fulfil its obligation to spend a minimum of $1 million.
The relevant lease noted that the Valuer was not to take into account the value of the tenant’s fixtures or fitout.
The court applied the approach set out by the High Court in Electricity Generation Corporation v Woodside Energy Ltd  HCA 7, that “the meaning of terms of a commercial contract [are] to be determined by what a reasonable businessperson would have understood those terms to mean”.
This led the court to conclude that “fitout work” is distinct from “fitout”, with the latter being the product of the former.
The Court concluded that the Valuer took into account an obligation to spend, but not the value of the resultant expenditure and hence was not in breach of the provision.
Ref: 122 Pitt Street Pty Ltd v Universal 1919 Pty Ltd (2015) NSWCA 390