A “purposive” approach to interpretation in Riverside Housing Association Ltd v White and another [2007] UKHL 20; [2007] PLSCS 81 enabled the House of Lords to avoid having to conclude that time was of the essence of rent reviews between a registered social landlord (RSL) and its tenants.
The landlord’s lease provided that “the rent will be increased annually with effect from the first Monday of June each year”. To trigger a review, the landlord had to give its tenants four weeks’ previous notice. But what did that mean? Could the landlord increase the rent on the first Monday in June only if it had given 28 days’ prior notice of its intention to do so? Or could it trigger a rent review on the first Monday in June by serving notice at a later date? The Lords accepted that either of these interpretations would accord with a commercial rent review, but decided that neither was correct.
They ruled that the rent review date was moveable and that the landlord was entitled to exercise its right to increase the rent once in any year by giving 28 days’ notice, which could take effect at any time on or after the first Monday in June.
The Lords emphasised that the structure and wording of the rent review provision in question was quite different from the commercial rent review clauses that are usually dealt with by the courts. They reasoned that the first interpretation of the clause was of such a draconian nature that it only rarely applies in commercial rent reviews, and it would be surprising if it were to apply to a lease between a RSL and its tenants. Regarding the second interpretation, it would be even more surprising if that were correct because it would mean that the landlord could serve a notice retrospectively and increase the rent due from individuals who were relatively impecunious.
By contrast, the notion of a moveable rent review date was sensible and fair. The parties had agreed that the rent was liable to review “with effect from the first Monday of June each year”. This did not mean with immediate effect from that date. The delay in reviewing the rent would not affect the level of the reviewed rent and the rent review clause did not stipulate that the notice must expire by any particular date. The parties had agreed that the rent “will be increased annually”. If the rent could be increased only on the first Monday in June in any year, it would be impossible for the landlord to do so if it were to miss serving an appropriate notice by one day. However, if the rent review date was moveable, a failure to serve a rent review notice on time would not deprive the landlord of the right to review the rent altogether. In such circumstances, the tenant would reap the benefit of a later review with no retrospective liability.
Landlords will welcome the decision because millions of pounds would have been at stake had the Lords reached a different conclusion.
Allyson Colby is a property law consultant
