Construction of clause — Lease — Rent review — Condition precedent — Service of notice to vary rent — Whether time of the essence — Whether rebuttable presumption — Whether concept of finality clearly shown — Judgment for landlords
The predecessor in title to the present lessor leased land at Ickfield Way, Baldock, Hertfordshire, to the tenant for a term of 99 years from May 15 1969 at a rent of £2,800 pa. Rent reviews were prescribed every 21 years under clause 1 and the first revision date was April 1 1989. Subclause 1(c) provided: “It shall be a condition precedent to any such variation of rent… that the council or the tenants shall be served twelve months’ written notice… of their intention to vary the rent…”. The lessors served two notices to vary the rent in 1990 and one in 1991 on which the argument was concentrated. It gave notice that it was their intention to vary the rent in accordance with the provisions of clause 1 of the lease with effect from April 1 1989. The substantial issue was whether, on a true construction, time was of the essence of the provisions requiring service of a notice to vary the rent so that any notice served after April 1 1988 would be ineffective to trigger a rent review. If that argument of the tenants was accepted by the court the lessors would have to wait for the rent review on the 42nd anniversary of the term.
Held Judgment was given for the lessors.
1. In United Scientific Holdings Ltd v Burnley Borough Council (1977) 243 EG 43 & 127, it was stated that in the absence of any contra-indications in the express words of the lease or in the inter-relation of the rent review clause and other clauses, other clauses, or in the surrounding circumstances, the presumption was that the timetable specified in a rent review clause for completion of the various steps for determining the rent payable was not of the essence of the contract.
2. In Henry Smith’s Charity Trustees v AWADA Trading & Promotion Services Ltd (1983) 269 EG 729, it was also stated that it was a rebuttable presumption of construction that time was not intended to be of the essence in relation to a right, conferred by a rent review clause on a landlord or tenant, expressed to be exercisable within a specified time. The other party then could bring matters to a head after the stipulated time for the exercise of the right had expired by a notice specifying the period within which he required the right to be exercised — if at all; the period thus specified would, if reasonable, then become of the essence of the contract.
3. Further, the best way of rebutting the presumption that time was not of the essence was to state expressly that stipulations as to the time were to be treated as being of the essence. That was not the only way. Any form of expression which clearly evinced the concept of finality attached to the end of a period would suffice to rebut the presumption.
4. In the instant case, the tenant submitted that there were “sufficient contra-indications” to rebut the presumption that time was not of the essence. It was contended that the words “It shall be a condition precedent…” as a matter of drafting were interchangeable with words expressly stating that time was to be of the essence of the provisions for service of notice by a certain date. However, that submission could not be accepted and those words could not be given a meaning equivalent to “time shall be of the essence” in a lease drafted in 1969.
5. But even if that were wrong, and the words did make time of the essence of the provisions for the service of notice, by clause (c) service of notice was to be “a condition precedent to any such variations of the rent”. Accordingly, the service of notice was a condition precedent to a variation of rent with effect from April 1 1989 but of which the time for the process resulting in such variation was not prescribed.
6. It followed that the service of notice was a trigger for the institution of a process of rent revision which could occur at any time both before or after the date from which the rent was to be reviewed.
Mark Lowe (instructed by the solicitor to North Hertfordshire District Council) appeared for the landlords; and Kim Lewison QC (instructed by Jaques & Lewis) appeared for the tenant.
