Lease — Rent review — Rent notice — Claimant landlord serving notices of rent increase at demised premises — Defendant tenants not receiving notices and failing to serve counternotice — Claimant seeking rent specified in notices — Whether notices properly served — Whether rent notices valid — Claim allowed
The claimant was the freeholder and landlord of a supermarket that was leased to the defendants. Clause 5(2) of the lease provided that the claimant could initiate a rent review by serving on the defendants a written notice providing for a rent increase. The defendants were entitled, within 28 days following the receipt of the notice, to serve a counternotice calling upon the claimant to negotiate the amount of the rent increase. If the defendants failed to serve a counternotice, they were deemed to have agreed to the specified increase.
Under clause 7 of the lease, the rent notice was deemed to have been served if it was left, addressed to the defendants, at the demised premises or sent by registered post to or left, addressed to them, at their last-know address. On 2 December 2004, envelopes containing the rent notices and addressed to each of the defendants were delivered to the premises and left at the customer services desk with instructions to pass them on to the manager.
The claimant received no response. On 17 February 2005, it wrote to the defendants pointing out that, since no counternotice had been served, the reviewed rent would be £72,600, as specified in the rent notices, copies of which were enclosed with the letters. In fact, the defendants had not received the notices. They purported to give counternotice following receipt of the claimant’s letter of 17 February 2005. They argued, inter alia, that the reference to “receipt” in clause 5(2) meant that the 28-day time limit ran from the date upon which the defendants received the notices, rather than the date upon which the notices were left at the premises. Consequently, the counternotice period was still running.
The claimant contended that the rent notices had been properly served so that the specified increase in rent had become fixed by default.
Held: The claim was allowed.
The rent notices had been properly served on and were deemed to have been received by the defendants on 2 December 2004. The claimant had used one of the methods provided for in the lease to effect service. Clearer and specific words would have been required had the parties intended the word “receipt” to mean when the rent notices actually reached the hands of the person authorised to accept notice on the defendants’ behalf: Wilderbrook Ltd v Oluwu [2005] EWCA Civ 1361 and Sun Alliance & London Assurance Co Ltd v Hayman [1975] 1 EGLR 63; (1974) 233 EG 927 considered.
The court rejected the argument that, in choosing the method it had, the claimant wanted to effect service without the notices coming to the defendants’ attention. Its primary motive had been to effect service in accordance with the lease. There was a quantifiable risk that the notices might not reach the defendants in time for them to serve a counternotice; so this was a contributory but not a dominant factor in the chosen method.
In any event, the court did not accept that the claimant had failed to apply the correct formula when calculating the rent increase. However, even if it had, such an error would be limited to the formula only and would not be fatal to the validity of the notices.
Edwin Johnson (instructed by Juliet Bellis & Co, of Croydon) appeared for the claimant; Timothy Fancourt QC (instructed by Eversheds, of Birmingham) appeared for the defendants.
Eileen O’Grady, barrister
