1 (a). Arrol is the tenant of a High Street shop in a UK town. The lease has three years unexpired at a rent of 230,000 on full repairing and insuring terms with five year rent reviews. Twelve years ago they carried out improvements with the written consent of Chadwick, the landlord. The improvements cost 320,000, and the landlord agreed to reduce market rent by 20% at each review. The current market rent of the premises on FRI terms is 320,000pa.

1 (b). Arrol has approached Chadwick and asked to surrender their interest in exchange for a new lease because they are trying to sell the business and the potential purchaser has concerns about the lack of security of the short unexpired term of the current lease.