Landlord and tenant — Rent review clause — Landlords’ notice given some 23 months late, but time not of the essence — Submission by tenants that the delay made it unreasonable for the landlords to call for a review — Estoppel not pleaded — Delay in present case not such as to cause prejudice or hardship to tenants or to lead to an inference that the right to review had been abandoned — Tenants’ defence rejected
This was a
summons by Printing House Properties Ltd as lessors of premises on the second
floor of Thames House, 566 Cable Street, London E1. The defendants were the
lessees of the premises, J Winston & Co Ltd. The lessors sought to
establish that they were entitled to operate the rent review procedure despite
the fact that their notice did not comply with a provision that it should be
given during the fourth year of the term.
R Bailey-King
(instructed by Stafford Clark & Co) appeared on behalf of the plaintiffs;
Paul de la Piquerie (instructed by Nabarro Nathanson) represented the
defendants.
Giving judgment,
DILLON J said: This summons is concerned with a rent review clause in an
underlease of premises known as unit E on the second floor of Thames House, 566
Cable Street, London E1. The underlease is dated August 19 1976, and it was
granted by the present plaintiffs as lessors to the present defendants as
lessees. The premises were demised to the lessees for a term of seven years
from June 25 1975 at a rent of £2,632.00 per annum and any increase therein as
provided by the lease.
The provision
for increase is contained in clause 4 of the underlease, which has the side
note ‘rent review’. Clause 4(1) provides that:
If the lessor
shall by giving notice in writing to the lessee at any time during the fourth
year of the term require a review of the rent payable under the underlease, the
rent shall be revised at the expiration of the fourth year of the term so as to
equal (subject as provided by clause 4(4)) the then rack-rental value of the
demised premises.
Clause 4(2)
contains a definition of the rack-rental value as meaning the rent at which the
demised premises might then reasonably be expected to be let in the open market
for a term equivalent to the residue then remaining unexpired of the term
created by the underlease (disregarding certain matters which I need not
rehearse). Subclause (3) provides that:
If, within a
period of six months from the date of any such notice given by the lessor, the
parties fail to agree the amount of the revised rent, the same may at any time
thereafter be referred to the decision of a sole arbitrator to be appointed by
the President of the Royal Institute of Chartered Surveyors.
Subclause (4)
provides that:
The rent
payable by the lessee from the expiration of the fourth year of the term shall
be (a) the rent fixed by agreement or arbitration (as provided by subclause
(3)), or the rent payable immediately before the expiration of the relevant
year of review, whichever shall be the greater.
The fourth
year of the term expired around June 25 1979. The precise date does not matter.
A point was adumbrated as to whether a notice given by the lessors was
inadequate because it referred to June 24 1979 rather than the 25th or 26th but
that has not been pursued. There is no doubt at all that the lessors did not
give any rent review notice within the fourth year of the term. The notice in
fact given was not given until May 18 1981, which is some 23 months late and
only a year and a bit before the expiration of the seven-year term. It is,
however, common ground as a result of the decision of the House of Lords in the
well-known case of United Scientific Holdings Ltd v Burnley Borough
Council [1978] AC 904 that time was not of the essence of the rent review
procedure and, accordingly, the landlords’ claim to review the rent is not
automatically defeated because the notice was not given during the fourth year
of the term.
What is said,
however, on behalf of the lessees is that the landlords have been guilty of
such unreasonable delay in giving their notice that they must be treated as
having impliedly abandoned all right for rent review. It is said that the delay
is such as to make it unreasonable of the landlords to call for a review now
and they cannot do so as they have impliedly abandoned their right to do so. It
is not suggested either in argument or in the evidence that the defendants have
acted to their detriment in reliance on the forbearance of the landlords to
serve a rent review notice or that the landlords have done anything, beyond the
mere failure to serve a notice until May of 1981, to encourage the lessees in
the belief that a rent review notice was not going to be served. It is not a
case, therefore, in which it is said on behalf of the lessees that the lessors
are estopped from relying on the notice in fact served in May of 1981. The case
has to be put on implied abandonment.
I have been
referred to a decision of Judge Thomas in James v Heim Gallery
(London) Ltd (1980) 252 EG 1017, [1979] 2 EGLR 91, which was subsequently
reversed by the Court of Appeal (1980) 256 EG 819. That, however, seems to have
been entirely concerned with the question of estoppel, which does not arise
here.
I have been
referred also to a decision of Foster J in Telegraph Properties Securities
Ltd v Courtaulds Ltd (1981) 257 EG 1153, [1981] 1 EGLR 104, where he
held that the plaintiffs could not call for a rent review where they had
delayed for six years and 10 days in so doing after the review date, it being a
rent review for a seven-year term from the review date; and, conversely, I have
been referred to a decision of Cantley J in H West & Son Ltd v Brecht
(1981) 261 EG 156, where he upheld a rent review and expressed the view that he
was not satisfied that unreasonable delay of itself precluded a landlord from
relying on a review clause. He went on:
It is otherwise
if such delay causes prejudice or hardship to the tenant, or if such delay is
so inordinate as to lead reasonably to the inference that the right to review
has been abandoned, or that there is tacit agreement not to enforce it.
In the present
case I do not find the delay so inordinate as to lead to any inference of
abandonment or tacit agreement not to enforce it. There has been delay, but I
do not find anything very grave in that delay. As has been pointed out, in
certain respects the landlords are the losers in that at present they are out
of pocket for the rent which they could have recovered earlier. Therefore, this
defence put forward to these proceedings in my judgment fails.
