Rent review — Time limits — Rent review clause in lease providing for landlord to apply to RICS for determination of rent if not agreed — No express time limit imposed — Tenant serving notice seeking to make time of the essence — Judge holding notice invalid — Whether time limit to be implied — Whether tenant entitled to serve notice — Whether notice giving landlord reasonable time to comply — Appeal allowed
The appellant was the tenant and the respondent was the landlord under a lease of premises granted for 42 years from 25 December 1968. The lease contained provisions for the rent to be reviewed at seven-year intervals. The revised rent was not to be less than the initial rent, and was to be agreed between the landlord and tenant on or before 29 September of the year in which the next seven-year period was to commence. In default of agreement, the rent was to be assessed by a surveyor “to be appointed on the application of the landlord” by the president of the RICS. There was no provision for an application by the tenant.
The parties reached no agreement as to the rent to be paid for the period commencing December 1996, although the tenant contended for a nil increase and gave details of the basis for that assessment. In September 2000, the tenant served a notice requiring the landlord to apply to the president of the RICS within 28 days, purporting to make time of the essence and stating that if such application were not made in time, the rent would remain at its existing level. The landlord received the notice eight days later.
The landlord sought a declaration that the tenant’s notice was ineffective to make time of the essence. A master, upheld by a judge on appeal, refused the tenant’s application for summary judgment and dismissed its claim on the ground that no time limit was attached to the provision for application to the RICS in respect of which time could be made of the essence.
The tenant appealed, contending that it was necessary to imply a requirement that the landlord should apply to the RICS within a reasonable time in order to give business efficacy to the lease. It submitted that the lease permitted downward as well as upward review, and that if no time limit were imposed, it might end up paying a higher rent than was properly due. The landlord contended that the lease provided, in effect, for upward-only review, and submitted that it was not necessary to imply any time limit because a failure to apply for determination of a new rent could only be beneficial to the tenant. It further submitted that the time given for compliance with the tenant’s notice was unreasonable.
Held: The appeal was allowed.
1. In order to give the lease business efficacy, it was necessary to imply a term into it imposing a time limit within which the landlord was to apply to the president of the RICS for a determination of the rent to be paid: Amherst v James Walker (Goldsmith & Silversmith) Ltd [1983] 2 EGLR 108 distinguished. The lease provided, on a true construction, for upward or downward rent reviews, with a minimum “floor” level. However, a finding the other way would not have rendered it unnecessary to imply a time limit. Such a limit was necessary to prevent the landlord from leaving the tenant in a state of uncertainty for years as to what the correct rent was for any given period of the lease. It was important for a tenant to know that, and it would be essential if, for instance, it wished to assign the lease. The appropriate time limit was “within a reasonable time”, which, in the instant case, would probably mean within the three months after 29 September until the start of the next seven-year period. Since there was a time limit, it had been open to the tenant to make time of the essence by serving notice: United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 applied.
2. The notice period given by the tenant was reasonable in the circumstances and, accordingly, was effective to make time of the essence, even taking into account the delay in the landlord receiving it. The matter had been dragging on for four years, the landlord had been given the tenant’s comparables and evidence for arguing for a nil rent increase, and, if it disagreed, all it had to do was to take the simple step of writing a letter to the RICS. In those circumstances, the relatively short notice period given by the tenant was a reasonable one: see United Scientific Holdings per Lord Diplock at p934.
Timothy Harry (instructed by Denton Wilde Sapte, of Milton Keynes) appeared for the appellant; John Martin QC and Jonathan Seitler (instructed by Memery Crystal) appeared for the respondent.
Sally Dobson, barrister
