The general presumption is that in the absence of any indications to the contrary, time is not of the essence of a rent review: United Scientific Holdings Ltd v Burnley Borough Council (1977) 243 EG 43. Consequently, tenants are not usually entitled to object if a landlord reviews their rent belatedly.
In Idealview Ltd v Bello [2009] PLSCS 340, the High Court was asked to consider whether arrears of ground rent payable following a rent review that was 13 years late were statute-barred under the Limitation Act 1980 (which imposes a six–year limitation period in respect of rent and a 12–year period in respect of liabilities under deeds).
The tenant bought premises subject to a ground rent of £60 pa. The lease provided for a rent review in 1994, but the rent had not been reviewed when the premises were sold in 2005. The freehold changed hands a year later. The new owner initiated the rent review and appointed an arbitrator who fixed the rent payable with effect from 25 March 1994 at £1,700 pa.
The tenant refused to accept liability for the new rent, but the court upheld the landlord’s claim. The judge ruled that a delay in enforcing a contractual right, or in performing a contractual duty, will not usually relieve or discharge the counterparty from liability under a contract. If one party is guilty of unreasonable delay, the prudent and proper course for the other to follow, if he wishes to bring matters to a head, will be to serve a notice fixing a reasonable period within which the contractual right must be exercised or the duty performed.
The judge accepted that, in some circumstances, the delay may be so excessive and inexplicable that the service of such a notice is unnecessary. None the less, it is usually necessary for the injured party to serve a notice or to contact the other before it can safely regard itself as having been relieved of liability. Consequently, the rent had been validly reviewed and the landlord was not estopped, by its words or behaviour, from pursuing the tenant for the arrears.
Nothing daunted, the tenant argued that the arrears were irrecoverable because they dated back to 1994. The judge was unimpressed. He ruled that the increase in rent did not fall due until the arbitrator had determined the reviewed rent. Therefore, the 1980 Act was not engaged.
The decision illustrates that tenants should never assume that a rent review has been abandoned. The tenant could have protected himself by discussing the rent review with the landlord before he bought the property and, if necessary, by obtaining some form of indemnity from the seller or by adjusting the price accordingly.
Importantly, the tenant might also have been able to protect himself by participating in the arbitration. He failed to take any such steps and the court took the view that any prejudice suffered was mostly of his own making.
Allyson Colby is a property law consultant
