Time is not usually of the essence of a rent review clause, unless the clause expressly so provides: United Scientific Holdings v Burnley BC [1978] AC 904; [1977] 2 EGLR 61. But can a tenant, who feels disadvantaged by his landlord’s failure to initiate a rent review, serve a notice on the landlord making time of the essence?
Proxima GR Properties Limited v Spencer [2017] UKUT 450 (LC) concerned ground rent reviews in three residential long leases that should have been activated in 2005. However, the landlord did not appoint an expert to review the rent until 3 March 2016, (more than six years after the tenant had written to the landlord setting a deadline for implementation of the rent review), and the new rent was not determined until 29 September 2016.
The expert fixed the new rent at £192.70 pa, which increased the sums payable by the tenant for an extension of his leases pursuant to the Leasehold Reform, Housing & Urban Development Act 1993 from £6,800 to £7,900 per lease. Had the tenant’s 2010 letter made time of the essence of the rent review? If so, this would invalidate the appointment of the expert and the rents that he had determined – and reduce the premiums payable to the landlord.
The First Tier Tribunal ruled in favour of the tenant, citing Barclays Bank plc v Savile Estates Ltd [2002] EWCA Civ 589; [2002] 2 EGLR 16 as authority for the proposition that tenants can make time of the essence of a rent review if the court can imply a term into the lease that the landlord will trigger the review within a reasonable time. It noted that the landlord’s omission had landed the tenant with a demand for backdated rent. In addition, the tenant would have been in a difficult position had he wished to sell any of his flats in the intervening period, since questions about the ground rent were bound to have been raised.
The Upper Tribunal has overturned the decision. It distinguished Barclays on the ground that the lease there did not state that an independent expert appointment could be made “at any time”. By contrast, the leases in this case did; they expressly allowed the landlord to appoint an expert “at any time after the expiration of the 20th … year of the said term”. Since the review clause was clear, and it is well established that an implied term should not be imported into a contract that conflicts with a clear express term of that agreement, it would be inappropriate to imply a term into the leases that the landlord must appoint an expert within a reasonable time. And, if there is no time limit, then there is nothing in respect of which it is possible to make time of the essence.
The judge quoted Millett J in Power Securities (Manchester) Ltd v Prudential Assurance Co Ltd [1987] 1 EGLR 121: “Neither party is entitled to abridge the time given by the contract to the other.” Furthermore, there was nothing unfair in the rent review provisions in the tenant’s leases that required adjustment pursuant to the Unfair Terms in Consumer Contract Regulations 1999 (since replaced by the Consumer Rights Act 2015) so as to entitle the tenant to serve a notice making time of the essence of an application for the appointment of an expert to determine any outstanding rent review under the leases.
Allyson Colby is a property law consultant