Landlord and tenant – Rent review – Ground rent – Time of the essence – Appellant landlord appealing against decision of First-tier Tribunal determining appropriate premium payable for grant of new leases of three flats in respondent’s long leasehold ownership – Whether ground rent validly reviewed – Whether notice validly served making time of essence – Appeal allowed
The respondent was the long leasehold owner of three flats at 29 Leaside Road, Hackney, London. A lease had been granted for each flat in September 1985 for a term of 125 years from 1 December 1984 at a yearly ground rent of £50 payable half yearly in advance “subject to review on each 21st anniversary of the grant hereof”. A rent review should have been carried out in 2005. However, the appellant landlord did not appoint an expert to review the rent until 3 March 2016, more than six years after the respondent had written to the appellant setting a deadline for implementation of the rent review (the January 2010 letters). The result was that the new rent was not determined until 29 September 2016. It was fixed at £192.70 per annum, which increased the sums payable by the respondent for an extension of his leases pursuant to the Leasehold Reform, Housing & Urban Development Act 1993 from £6,800 to £7,900 per lease.
An issue arose whether the respondent’s 2010 letters had made time of the essence of the rent review in which case the appointment of the expert and the rents determined by him would be invalid, resulting in a reduction in the premiums payable to the appellant. The First-tier Tribunal (FTT), which determined the matter on the papers, and without carrying out a physical inspection of the property, found in favour of the respondent, relying on the decision of the Court of Appeal in Barclays Bank plc v Savile Estates Ltd [2002] EWCA Civ 589; [2002] 2 EGLR 16 as authority for the proposition that tenants could make time of the essence of a rent review if the court could imply a term into the lease that the landlord would trigger the review within a reasonable time.
The parties’ expert valuers had agreed two alternative valuations. If the ground rent had been properly reviewed and determined with effect from 1 December 2005 at a figure of £192.70 per annum, it was agreed that the appropriate premium payable in respect of each lease extension was £7,900. If (as a result of letters said to have been sent by the respondent seeking to make time of the essence of the appellant’s application for an expert to determine the rent review) the December 2005 rent review was time-barred, so that the ground rent remained at £50 per annum, it was agreed that the appropriate premium payable in respect of each lease extension was £6,800. The FTT held that the ground rent had not been properly reviewed and determined so that the appropriate premium was the lesser figure.
The appellant appealed with the permission of the deputy chamber president who directed that the appeal would be a review of the decision of the FTT conducted under the Upper Tribunal’s written representation procedure.
Held: The appeal was allowed.
(1) While the FTT had rightly considered the decision of the Court of Appeal in the Barclays Bank case to be of potential relevance and application to the rent review provisions in residential leases, it failed properly to analyse the difference between the provisions of the lease in that case and the subject leases. The lease in the Barclays Bank case merely provided for the reviewed rent to be assessed (in default of agreement) by a surveyor “to be appointed on the application of the landlord by the President” of the RICS. There was no express provision (as in the subject leases) for such application to be made “at any time” after a particular date. There was no stated time within which the option to seek a rent review in default of agreement had to be exercised and no stated time by which the landlord had to make up his mind and apply to the President of the RICS. Since the review clause was clear, and it was well established that an implied term should not be imported into a contract that conflicted with a clear express term of that agreement, it would be inappropriate to imply a term into the leases that the appellant had to appoint an expert within a reasonable time. If there was no time limit, there was nothing in respect of which it was possible to make time of the essence. The FTT should have had regard to, and applied, the statement at paragraph 3.12.3 of the Handbook of Rent Review that “… it is axiomatic that, in order for a party to be able to serve notice making time of the essence, there must be a time limit (express or implied) for the step in question … If the rent review clause merely entitles the landlord to initiate a rent review at any stage (without stipulating when the initiation must take place), then a notice purporting to make time of the essence will simply be of no effect, there being no time limit to which such a notice could attach”: Barclays Bank plc v Savile Estates Ltd [2002] EWCA Civ 589; [2002] 2 EGLR 16 distinguished.
(2) A notice making time of the essence could not be served unless a time limit was prescribed in the contract. No such notice could be served where a party had an express right to take a particular step at any time. In any event, there was nothing unfair in the rent review provisions of the subject leases which would require adjustment so as to entitle the respondent to serve notice making time of the essence of an application for the appointment of an expert to determine any outstanding rent review under the subject leases: Power Securities (Manchester) Ltd v Prudential Assurance Co Ltd [1987] 1 EGLR 121 applied.
(3) Accordingly, the FTT’s determination would be set aside and the appropriate premium payable for each new lease was £7,900.
Eileen O’Grady, barrister
To read a transcript of Proxima GR Properties Ltd v Spencer, click here
