Time is not usually of the essence of rent reviews. However, the position is different if the lease stipulates that a failure to take a step in the rent review process by a specified date will result in the rent being fixed at a figure suggested in a notice served by the landlord: see Starmark Enterprises Ltd v CPL Distribution Ltd [2001] EWCA Civ 1252; [2022] Ch 306.
Such deeming provisions are becoming increasingly rare, but can still be found in older leases. The decision in Regal (West Point) Ltd v Rouf [2011] PLSCS 54 highlights the care that is required in such cases. Here, the landlord served a notice, around 20 months after the relevant review date, suggesting that the rent should be increased by £20,000 pa. Under the lease, the tenant had two months in which to respond; if it failed to do so, it would be deemed to have agreed the new rent.
In due course, the landlord brought proceedings to recover the arrears of the reviewed rent on the ground that the tenant had not objected to its proposal. The tenant claimed that it had objected orally and that it was in any event too late to review the rent. The county court upheld the landlord’s claim.
The decision illustrates the importance of adhering to the rent review procedures in a lease. A tenant may challenge the validity of a notice served, ask the landlord to explain how it calculated the suggested new rent or meet with the landlord to voice its opposition to or to negotiate the new rent. However, it should always protect itself by serving any counternotice required under the lease.
The tenant had not served a written notice objecting to the landlord’s rent proposed because it was under the mistaken impression that it had persuaded the landlord to abandon the rent review. The landlord had not corrected that impression, but not had it encouraged the tenant’s belief. It was therefore entitled to rely on the lease provisions.
The judge ruled that the lease did not limit the period within which the landlord’s rent review notice must be served. He dismissed the tenant’s argument that time was of the essence of the rent review because the lease included a break clause in its favour that was linked to the review date. The judge accepted that the break clause had been included to enable the tenant to terminate the lease if the reviewed rent was unacceptable and acknowledged that the tenant could be prejudiced if the review were significantly delayed. However, the tenant was entitled to initiate the rent review process. Consequently, there was no basis for inferring that the landlord’s notice was too late.
Tenants should be wary of leases that include deeming provisions fixing the rent in the absence of a tenant counternotice served. Where a tenant has to accept such a lease, it should diarise the dates and ensure that its counternotice conforms with and is served in the manner required by the lease. In this way, it will have a chance of avoiding the rent suggested by the landlord.
Allyson Colby is a property law consultant
