Lease — Late notice of rent review — Appellant challenging right to review rent — Whether respondent serving valid trigger notice of rent review — Whether appellant serving valid counternotice — Appeal allowed in part
The property was leased to the appellant for a term of 12 years at a rent of £6,500 pa. The landlord had the option of a fourth-yearly rent review by virtue of clause 5.1 of the lease, which required the landlord to give the tenant notice of a review no more than 12 months before the review date stating the new basic rent: Clause 5.1(b). If the tenant did not give the landlord counternotice of its refusal to accept within two months of the date of the review notice (time being of the essence), the new basic rent was to apply from the review date: clause 5.1(c). If the parties could not agree, an independent expert was to be appointed to determine the rent.
The respondent acquired the reversion to the lease in August 2001, six months after the first review date on 5 February 2001, when no trigger notice had been served. On 19 February 2002, the respondent gave the appellant notice proposing a new basic rent of £30,000 pa from 1 February 2001.
The appellant said that the notice was invalid since the terms of the lease required one year’s notice of any rent review. He refused to enter into arbitration. The respondent argued that the rent review provisions in the lease had been properly implemented because, in effect, clause 5.1(b) contained no time limit by which a trigger notice had to be served. An independent surveyor determined the revised rent at £28,000 pa following submissions from the respondent. The appellant made no submissions.
A county court judge concluded that the respondent’s trigger notice was valid even though it had been served after the date specified in clause 5.1(b) since time was not of the essence of that date. However, the appellant’s response was not a valid counternotice under clause 5.1(c), since it did not challenge the new basic rent, but rather the respondent’s right to review the rent at all. The appellant appealed.
Held: The appeal was allowed in part.
The respondent had validly implemented the rent review, albeit late. It was settled principle that, in the absence of any contra-indications in the lease or surrounding circumstances, the presumption was that the timetable specified in a rent review clause for determining the rent payable in the period following the review date was not of the essence of the contract. The fact that the parties had described the rent review as an option for the landlord did not mean that it was to be treated as an option in the legal sense, with the consequence that time was of the essence of any stipulation as to its implementation. The fact that time was made expressly of the essence for the service of the counter-notice did not mean that time was to be impliedly of the essence for the service of the landlord’s trigger notice: United Scientific Holdings Ltd v Burnley Borough Council [1977] 2 EGLR 61 applied.
However, contrary to the judge’s conclusion, the appellant had served a valid counternotice since it was in terms which were sufficiently clear and unambiguous to leave the respondent in no doubt, as an ordinary landlord, that he was purporting to exercise his right to challenge the proposed basic new rent: Nunes v Davies Laing & Dick Ltd [1986] 1 EGLR 106 and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57 applied. Patel v Earlspring Properties Ltd [1991] 2 EGLR 131 considered.
David Giles (instructed by Suriya & Co) appeared for the appellant; Tom Weekes (instructed by Mishcon de Reya) appeared for the respondent.
Eileen O’Grady, barrister
