Rent review — Date from which reviewed rent effective — Tenancy agreement specifying date — Whether appellant landlord’s notices specifying different date effective to increase rent — Whether time of the essence — Appeal allowed
The respondent housing association let a property to the appellants by way of an assured tenancy. The terms of the lease permitted the respondent to increase the rent annually at a rent variation date in June of each year.
The respondent wished to alter the rent increase date to the April of each year. It imposed no rent increase in June but it notified the tenants that it proposed to implement the new system in the following April, which it subsequently did.
The respondent brought proceedings against the appellants, seeking possession on the ground of arrears of rent lawfully due. By their defence, the appellants claimed that the rent arrears were not lawfully due, within the meaning of ground 10 of Schedule 2 to the 1988 Act, because the respondent had departed from the contractual rent variation procedures in respect of the variation date.
Finding in favour of the respondent, the judge at first instance applied the presumption that time was not of the essence on a rent review. He rejected alternative arguments by the respondent that: (i) the parties had altered the rent variation date by agreement; or (ii) the appellants were estopped, on the basis of a common assumption about the validity of the rent variation notice, from asserting that it was invalid.
On appeal, the appellants submitted that the judge had erred in holding that the presumption applied not only to the machinery for fixing rent on a review but also to the date from which the increase was to take place. The respondent cross-appealed on the other issues.
Held: The appeal was allowed; the cross-appeal was dismissed.
1. The presumption that time was not of the essence in relation to rent reviews was a rule of equity. In respect of a contract that provided for something to be done by a particular time, it distinguished between non-essential terms, where it would be inequitable to insist upon them as a bar to the other party’s rights, and those that were of the essence of the contract. Even if a contract did not expressly state that time was of the essence, the presumption that it was not could be displaced by the subject matter of, or indications in, the contract itself.
In the instant case, there was no scope for the application of the presumption in relation to the rent variation clause in the tenancy agreement. The relevant clause merely identified the rent variation date should the respondent choose to increase the rent; since the respondent was not obliged to do so, the clause could not oblige it to do so by a particular date. Equity was not called upon to remedy any failure in the lease. The provision of a specific date seemed, on the contrary, to be significant since it was linked with the rent formula and gave the tenant certainty as to the date from which an increased rent could be demanded: United Scientific Holdings Ltd v Burnley Borough Council [1977]2 EGLR 61 distinguished.
2. The rent increase notices contained no offer to vary the tenancy agreement, acceptance of which could have founded a decision to do so. The notices simply informed the appellants of what they would have to pay by way of rent and from what date.
3. The respondent could not rely upon estoppel by convention. To do so would be to use estoppel as a sword rather than a shield, since the respondent’s claim for arrears of rent was dependent upon the validity of the rent variation notices: Aristocrat Property Investments v Harounoff [1982] 2 EGLR 83; (1982) 263 EG 352 applied; Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 distinguished.
Jan Luba QC and Adam Fullwood (instructed by Stephensons, of St Helens) appeared for the appellants; Andrew Arden QC and Iain Colville (instructed by Bremners, of Liverpool) appeared for the respondent.
Sally Dobson, barrister
